##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 20-F/A
 (Amendment
    No. 1)
  o

REGISTRATION STATEMENT PURSUANT
    TO SECTION 12(b) OR(g) OF THE SECURITIES EXCHANGE ACT OF
    1934ORþ

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934For the fiscal year ended
    December 31, 2005ORo

TRANSITION REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934for the transition period
    from          to  Commission File
    Number 333-11910
      MAXCOM TELECOMUNICACIONES, S.A.
    DE C.V.
 (Exact name of Registrant as
    specified in its charter)
  MAXCOM TELECOMMUNICATIONS,
    INC.
 (Translation of
    Registrants name into English)
  UNITED MEXICAN STATES
 (Jurisdiction of incorporation
    or organization)
      Guillermo Gonzalez Camarena
    No. 2000
 Colonia Centro de Ciudad
    Santa Fe
 Mexico, D.F. 01210
 (Address of principal executive
    offices)
      Securities registered or to be
    registered pursuant to Section 12(b) of the Act:
 None
  Securities registered or to be
    registered pursuant to Section 12(g) of the Act:
  None
 Securities for which there is a
    reporting obligation pursuant to Section 15(d)
 of the Act:
  Senior Step  Up Notes
    Due 2009
 Senior Notes due 2007
 133/4%
    Series B Senior Notes Due 2007
 Series N-2
    Ordinary Participation Certificates
  Indicate the number of outstanding shares of each of the
    issuers classes of capital or common stock as of the close
    of the period covered by the annual report.
  Series A shares, no par value,
    common voting stock


4,508,644Series A-1 shares,
    no par value, common voting stock with preferred liquidation
    rights


6,088,896Series B-1 shares,
    no par value, common voting stock with preferred liquidation
    rights


10,181,950Series N shares, no par value,
    without voting rights


8,861,834Series N-1 shares,
    no par value, preferred stock with limited voting rights


220,714,874Series N-2 shares,
    no par value, preferred stock with limited voting rights


26,867,820   Indicate by check mark if the registrant is a well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act
 YES o     NO þ
  If this report is an annual or transition report, indicate by
    checkmark if the registrant is not required to file reports to
    Section 13 or 15 (d) of the Securities Exchange Act of
    1934
  YES o     NO þ
  Indicate by check mark whether the registrant (1) has
    filed all reports required to be filed by Section 13 or
    15(d) of the Securities Exchange Act of 1934 during the
    preceding 12 months (or for such shorter period that the
    registrant was required to file such reports), and (2) has
    been subject to such filing requirements for the past
    90 days.
  Yes þ     No o
  Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer or an non-accelerated
    filer. See definition of accelerated and large accelerated
    filer in
    Rule 12b-2
    of the Exchange Act (Check one)
  Large accelerated
    filer o          Accelerated
    filer o          Non-accelerated
    filer þ
  Indicate by check mark which financial statement item the
    registrant has elected to follow:
  Item 17 o     Item 18 þ
  If this is an annual report, indicate by check mark whether
    the registrant is a shell company (as defined in
    Rule 12b-2
    of the Exchange Act)
  YES o     NO  þ




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##### 



TABLE OF
    CONTENTS
  PagePART I


1ITEM 1.


IDENTITY OF
    DIRECTORS, SENIOR MANAGEMENT AND ADVISORS


1ITEM 2.


OFFER STATISTICS
    AND EXPECTED TIMETABLE


1ITEM 3.


KEY
    INFORMATION


1EXCHANGE
    RATES


4ITEM 4.


INFORMATION ON THE
    COMPANY


14ITEM 5.


OPERATING AND
    FINANCIAL REVIEW AND PROSPECTS


39ITEM 6.


DIRECTORS, SENIOR
    MANAGEMENT AND EMPLOYEES


67ITEM 7.


MAJOR SHAREHOLDERS
    AND RELATED PARTY TRANSACTIONS


73ITEM 8.


FINANCIAL
    INFORMATION


78ITEM 9.


THE OFFER AND
    LISTING


79ITEM 10.


ADDITIONAL
    INFORMATION


79PART II





111ITEM 11.


QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


111ITEM 12.


DESCRIPTION OF
    SECURITIES OTHER THAN EQUITY SECURITIES


112PART III


112ITEM 13.


DEFAULTS, DIVIDEND
    ARREARAGES AND DELINQUENCIES


112ITEM 14.


MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS


112ITEM 15.


CONTROLS AND
    PROCEDURES


113ITEM
    16.


113PART IV


114ITEM 17.


FINANCIAL
    STATEMENTS


114ITEM 18.


FINANCIAL
    STATEMENTS


115ITEM 19.


EXHIBITS


E-1GLOSSARY OF
    TELECOMMUNICATIONS TERMS


G-1EX-12.1: CERTIFICATIONEX-12.2: CERTIFICATIONEX-99.2: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES   i




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EXPLANATORY
    NOTE
  Form 20-F/A Form 20-F
            
    competition in local services, data, Internet and VoIP services;
    our ability to service our debt;
    limitations on our access to sources of financing on competitive
    terms;
    significant economic or political developments in Mexico and the
    U.S.;
    changes in our regulatory environment, particularly developments
    affecting the regulation of the telecommunications industry;
    our need for substantial capital;
    general economic conditions, including the economic slow-down in
    the U.S.; ii




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
    the global telecommunications downturn;
    performance of financial markets and thus our ability to
    refinance our financial obligations when they come due;
    our history of operating losses;
    the risks associated with our ability to implement our growth
    strategy;
    customer attrition;
    technological innovations;
    currency exchange rates, including the Mexican Peso 
    U.S. dollar exchange rate;
    changes in the policies of central banks
    and/or
    foreign governments.  Form 20-F, page G-1 Form 20-F
  011-52-55-5147-1125.
 iii




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PART I  ITEM
    1.
    IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS    ITEM
    2.
    OFFER
    STATISTICS AND EXPECTED TIMETABLE    ITEM
    3.
    KEY
    INFORMATION  A.
    Selected
    financial data    Bulletin B-10
  As of the Year Ended December 31,2001


2002


2003


2004


2005


2005(2)(Unaudited)Thousands of constant December 31, 2005 pesosand thousands of U.S. dollars(1)Statement of Operations
    Data:Mexican GAAPNet revenues

Ps.
375,573


Ps.
605,712


Ps.
832,212


Ps.
897,149


Ps.
1,150,472


$
108,229Operating costs and expenses:Network operating costs


(179,716
)


(235,174
)


(298,986
)


(316,606
)


(383,765
)


(36,102
)Selling, general and administrative


(513,619
)


(484,543
)


(419,018
)


(386,871
)


(468,270
)


(44,052
)Depreciation and amortization


(320,723
)


(358,907
)


(365,411
)


(346,045
)


(281,636
)


(26,494
)Total operating costs and expenses


(1,014,058
)


(1,078,624
)


(1,083,415
)


(1,049,522
)


(1,133,671
)


(106,648
)Operating (loss) income


(638,485
)


(472,912
)


(251,203
)


(152,373
)


16,801



1,581 1




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As of the Year Ended December 31,2001


2002


2003


2004


2005


2005(2)(Unaudited)Thousands of constant December 31, 2005 pesosand thousands of U.S. dollars(1)Integral cost (income) of financing:Interest expense, net


(418,343
)


(229,620
)


(28,310
)


(38,733
)


(97,123
)


(9,137
)Exchange (loss) gain, net


108,456



(233,511
)


(188,186
)


(1,451
)


19,973



1,879Gain on net monetary position


98,742



113,717



82,781



89,041



22,090



2,078Gain on repurchase of debt


144,846Total integral cost offinancing


(66,299
)


(349,414
)


(133,715
)


48,857



(55,060
)


(5,180
)Nonrecurring charges


(74,323
)Other income (expense), net


(212
)


2,987



(164
)


(818
)


8,991



846Special item


















(15,365
)


(1,446
)Tax


(896
)


(8,755
)


(14,033
)


(28,969
)


(26,606
)


(2,503
)Net (loss) income


(780,215
)


(828,094
)


(399,115
)


(133,303
)


(71,239
)


(6,702
)U.S. GAAPOperating (loss) gain


(635,461
)


(531,639
)


(286,124
)


(199,864
)


(5,457
)


(513
)Net (loss) gain


(777,299
)


(394,101
)


(411,652
)


1,221,900



171,922



16,173Balance Sheet Data:Mexican GAAPCash and cash equivalents

Ps.
206,171


Ps.
130,793


Ps.
45,366


Ps.
62,189


Ps.
223,423


$
21,018Restricted cash


223,157











5,740Working capital(3)


(45,177
)


(20,337
)


14,455



(22,664
)


(117,074
)


(11,014
)Restricted cash to long term














13,105



7,672



722Frequency rights, net


125,239



118,014



104,644



97,419



86,102



8,100Telephone network systems and
    equipment, net


1,635,273



1,794,949



1,671,129



1,783,834



2,082,795



195,936Preoperating expenses, net


265,029



230,987



195,247



158,607



122,305



11,506Intangible assets, net


357,820



481,373



424,859



378,330



303,527



28,554Labor obligations upon retirement


















14,798



1,392Rent deposits and other assets


37,405



33,445



30,607



21,612



10,501



988Total assets


2,996,788



2,992,778



2,687,663



2,752,445



3,159,718



297,245Long-term liabilities


2,914,664



2,085,728



2,200,572



710,569



883,555



83,119Total liabilities


3,224,967



2,314,164



2,407,043



1,115,285



1,375,872



129,433Capital stock


1,166,059



1,905,012



1,905,012



2,500,957



2,744,607



258,194Additional paid-in capital


122,220



475



1,595



895,494



219,622



20,661Accumulated deficit


(1,516,458
)


(1,226,873
)


(1,625,988
)


(1,759,291
)


(1,180,383
)


(111,043
)Total shareholders equity
    (deficit)


(228,179
)


678,614



280,620



1,637,160



1,783,846



167,812U.S. GAAPLong-term liabilities


2,914,664



1,715,619



1,853,347



479,570



701,082



65,953Total Shareholders equity (deficit)

Ps.
(480,864
)

Ps.
(3,132
)

Ps.
(413,663
)

Ps.
1,010,743


Ps.
1,182,664


$
111,257 2




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As of the Year Ended December 31,2001


2002


2003


2004


2005


2005(2)(Unaudited)Thousands of constant December 31, 2005 pesosand thousands of U.S. dollars(1)Other Financial Data:Mexican GAAPCapital expenditures(4)


617,430



596,904



136,267



359,359



447,064



42,057Ratio of earnings to fixed
    charges(5)






















Resources arising from (used in)
    operating activities


(402,069
)


(384,420
)


(51,212
)


276,715



298,574



28,088Resources derived from financing
    activities


(111,675
)


905,950



102,052



99,467



309,724



29,137Resources used in investing
    activities


(617,430
)


(596,904
)


(136,267
)


(359,359
)


(447,064
)


(42,057
)U.S. GAAPCash (used in) provided by
    operating activities

Ps.
(434,378
)

Ps.
(436,816
)

Ps.
18,492


Ps.
145,412


Ps.
468,590


$
44,082Cash provided (used in) by
    financing activities


(44,293
)


689,410



0



144,339



141,171


$
13,280Cash used in investing activities


(597,304
)


(458,460
)


(70,710
)


(247,547
)


(441,745
)


(41,556
)   Notes to
    Selected Historical Consolidated Financial Information
    (1)
    
    Pursuant to Mexican GAAP, financial data for all periods in the
    financial statements have, unless otherwise indicated, been
    restated in constant pesos as of December 31, 2005.
    Restatement into December 31, 2005 pesos is made by
    multiplying the relevant nominal peso amount by the inflation
    index for the period between the end of the period to which such
    nominal peso amount relates and December 31, 2005. The
    inflation index used in this annual report for 2001 figures is
    1.2070, for 2002 figures is 1.1561, for 2003 figures is 1.0397,
    for 2004 is 1.0519 and for 2005 is 1.0333.(2)
    
    Peso amounts were converted to U.S. dollars at the exchange
    rate of Ps.10.63 per U.S.$1.00 reported by the Federal
    Reserve Bank of New York as its noon buying rate for pesos on
    December 30, 2005. Such conversions are for the convenience
    of the reader and should not be construed as representations
    that the peso amounts actually represent such U.S. dollar
    amounts or could be converted into U.S. dollars at the rate
    indicated, or at all.(3)
    
    Working capital is defined as current assets (excluding cash and
    cash equivalents and restricted cash) less current liabilities
    (excluding current maturities of long-term debt, which includes
    interest payable).(4)
    
    Capital expenditures include frequency rights, telephone network
    systems and equipment, intangible assets and other assets.
    Investing activities in the consolidated statements of changes
    in financial position are net of dispositions.(5)
    
    Our earnings have been insufficient to cover fixed charges since
    we started incurring debt in 1998. Fixed charges include
    interest expense, capitalized interest and the portion of
    operating lease rental expense that represents the interest
    factor. The fixed charge coverage deficiency for the years ended
    December 31, 2001, 2002, 2003, 2004 and 2005 amounted to
    Ps.785.8 million, Ps.819.5 million,
    Ps.384.4 million, Ps.103.8 million, and
    Ps.44.2 million, respectively. 3




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EXCHANGE
    RATES    Noon Buying Rate(1)Period End


Average(2)


High


Low2001


9.16



9.326



9.97



8.952002


10.43



9.745



10.43



9.002003


11.24



10.846



11.41



10.112004


11.15



11.309



11.63



10.802005


10.63



10.868



11.41



10.41December 2005










10.77



10.41January 2006










10.64



10.44February 2006










10.53



10.43March 2006










10.95



10.46April 2006










11.16



10.86May 2006










11.31



10.84     (1)
    
    Source: Federal Reserve Bank of New York.(2)
    
    Represents the average rates for each period indicated,
    calculated by using the average of the exchange rates on the
    last day of each month during the period.  B.
    Capitalization
    and indebtedness    C.
    Reasons
    for offer and use of proceeds    D.
    Risk
    factors  Factors
    relating to Maxcom
  We
    anticipate that we will have negative operating cash flow until
    we develop a sufficiently large customer base
      We
    expect to incur net losses through at least 2006
   4




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We may
    need additional financing
  Step-Up
  We may
    be unable to build out our network in a timely manner or without
    undue cost
    
    our inability to obtain permits to use public rights of way;
    our inability to obtain future financing necessary for such
    buildout;
    unforeseen delays, costs or impediments relating to the granting
    of state and municipal permits for our buildout;
    delays or disruptions resulting from physical damage, power
    loss, defective equipment or the failure of third-party
    suppliers or contractors to meet their obligations in a timely
    and cost-effective manner; and
    regulatory and political risks relating to Mexico, such as the
    temporary seizure or permanent expropriation of assets, import
    and export controls, political instability, changes in the
    regulation of telecommunications and any future restrictions on
    the repatriation of profits or on foreign investment.    We
    have experienced significant turnover in our executive ranks,
    which has affected our ability to develop and execute our
    business strategies
         5




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We may
    not have sufficient administrative, operational or financial
    resources to grow as rapidly as we would like
    We
    depend on Telmex for interconnection
  and/or
  Our
    high leverage could affect our ability to service our
    debt
          
    our ability to fund capital expenditures, acquisitions or
    operating losses or to refinance existing indebtedness;
    our flexibility in planning for, or reacting to, changes in our
    business and market conditions; and
    our ability to compete in our markets. 6




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We are
    and will be subject to restrictive covenants
    
    borrow money;
    pay dividends on our capital stock;
    purchase stock or repay subordinated indebtedness;
    make investments;
    restrict the ability of our subsidiaries to pay dividends;
    use assets as security in other transactions;
    sell assets; and
    consolidate or merge into other companies.    We may
    not be able to finance an exit transaction
    repurchase
    If we
    do not successfully upgrade and operate accounting, billing,
    customer service and management information systems, we may not
    be able to achieve desired operating efficiencies
    Our
    operations are dependent upon our ability to protect and
    maintain our network infrastructure
      We
    could be negatively affected by the by-pass
    traffic
  Comisión Federal de Telecomunicaciones
 7




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Our
    telecommunications network infrastructure has several
    vulnerabilities and limitations
    
    physical damage;
    power loss;
    capacity limitations;
    software defects as well as hardware and software obsolescence;
    breaches of security, whether by computer virus, break-in or
    otherwise;
    denial of access to our sites for failure to obtain required
    municipal or other regulatory approvals; and
    other factors which may cause interruptions in service or
    reduced capacity for our customers.    Our
    results are negatively impacted by high levels of
    churn
    
    our customer delinquency;
    our limited coverage area that restricts our ability to continue
    providing service when a customer moves;
    our failure to meet service levels required by our customers;
    promotional and pricing strategies of our competitors; and
    economic conditions in Mexico.     8




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Factors
    relating to the Mexican telecommunications industry
  We
    face significant increasing competition, which may negatively
    affect our operating margins
            If the
    Mexican government grants more concessions, the value of our
    concessions could be severely impaired
    We
    could lose our concessions if we do not comply fully with their
    terms
   9




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Secretaría de Comunicaciones y
    Transportes
  Fraud
    increases our expenses
      The
    technology we use may be made obsolete by the technology used by
    our competitors
  and/or
  The
    Mexican government could temporarily seize or permanently
    expropriate our assets under certain circumstances
    As a
    result of technological and regulatory changes, we may face
    additional competition in the future from new market
    participants, which may result in lower prices for
    telecomminications services, less margins,
    and/or a
    loss of market share
   10




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If a
    Long Distance Calling Party pays system is
    implemented in Mexico, it could increase our costs and result in
    a loss of traffic
    Factors
    relating to Mexico
  If
    Mexico experiences future political and economic crises, our
    business could be affected negatively
    Partido Acción Nacional Partido Revolucionario
    Institucional
     11




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Changes
    in tax or other regulations could have an adverse impact on our
    financial condition
  Ley
    del Impuesto Especial Sobre Producción y Servicios
      Foreign
    ownership restrictions limit our ability to raise equity
    capital
      We may
    lose money because of peso devaluations
     12




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3 4 3 4 peso-to-dollar
  Developments
    in other countries may impact the price of our
    securities
  3 4 3 4
  Our
    financial statements do not give you the same information as
    financial statements prepared under United States accounting
    principles
    You
    may suffer a U.S. dollar shortfall if you obtain a judgment
    against us or a distribution in bankruptcy
  series N-2
  Banco de México Diario Oficial de la Federación
  concurso mercantil
 13




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We may
    not be able to make payments in U.S. dollars
    High
    inflation rates in Mexico may decrease demand for our services
    while increasing our costs
    
    inflation can adversely affect consumer purchasing power,
    thereby adversely affecting consumer demand for our services and
    products; and
    to the extent inflation exceeds our price increases, our prices
    and revenues will be adversely affected in real terms.  High
    interest rates in Mexico could increase our financing
    costs
  28-day
 ITEM
    4.  INFORMATION ON THE COMPANY  A.
    History
    and development of the Company  sociedad anónima de capital variable
  (52) 55-5147-1111.
    point-to-point point-to-multipoint
   14




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B.
    Business
    overview    170-kilometer
  state-of-the-art
    state-of-the-art
  dial-up
    last-mile
 15




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
    prices that are between 5% to 15% below current market levels;
    one-stop-shopping service, such as our
    all-in-one-bill
    feature (which allows our customers to receive a single invoice
    containing all local, long distance, data and Internet services
    together); and
    state-of-the-art
    call center equipped with Customer Relationship Management
    Program (also known as CRM) application software to receive all
    customer inquiries including
    around-the-clock
    customer care availability.  Strategy
    Capture
    unmet demand for telephony services
    Build
    our network on a demand-driven, modular basis
        Differentiate
    product offerings based on features and price
   16




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Deploy
    cost-efficient technology
    fiber-to-the-home
  Capitalize
    on our nationwide local telephony concession
            Our
    markets
  Concession
    areas
     17




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Clusters
    and single sites
  one-on-one
    
    Identify clusters through market research. Our market research
    is designed to identify small- and medium-sized businesses and
    residential customers. Once we identify potential customers
    within the clusters, according to the marketing sales forecast
    we design the deployment of the access network to cover them. We
    perform a return on investment analysis for each cluster to
    assure that the investment made in such cluster meets our return
    benchmarks.
    Deploy clustersthrough the implementation of a sales
    plan for each cluster based on our network deployment schedule.
    We promote our services at the same time that we build our
    network.
    Fill in clustersby offering our services to all
    customers within the cluster.   18




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Our
    network
  Buildout
    strategy
      Network
    backbone
  170-kilometer
  57-kilometer
      Last-mile
    connectivity
  last-mile point-to-point
 19




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point-to-point point-to-multipoint
  last-mile
    Switching
            Operational
    support systems
      
    offer a flexible, large selection of services; 20




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
    provide tailored service packages;
    quickly introduce products and services;
    deliver near real-time activation and disconnection;
    deliver a high quality of service;
    minimize activation errors; and
    provide accurate and timely billing services.    
    Spanish language support for invoices and documentation;
    a high degree of integration between all operational support
    systems components;
    flow-through of information, provisioning and service activation;
    capabilities to monitor, manage and resolve network problems;
    allowance for growth on a modular scalable basis; and
    support of administrative operations for financial controls.  Data
    Center
    Mediation
    and Provisioning Operational Support Systems
      Service
    Management Operational Support Systems
    
    Order Management & Service Provisioning: manages the
    service delivery process, involving different transactions
    across our functional areas.
    Workflow management:  provides the capability to
    maintain provisioning plans, which are groups of tasks needed to
    manage the flow of work and information. 21




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
    Network Inventory and Design Management: brings together the
    geographical, physical, electrical, and logical dimensions of
    the network into a single view supported by a set of integrated
    equipment administration and network design modules, also is
    able to manage all number and IP addresses inventory.
    Trouble Management & Escalation.      Business
    Management Operational Support Systems
    Administrative
    System
    Our
    services
  last-mile
  dial-up
  Service
    products
    
    LineaMax Residencial.  This is a service for
    residential customers that provides a high-quality telephone
    line. The features offered under this product include voice
    mail, call waiting, call forwarding, three-way calling, call
    blocking, speed dialing and unlisted numbers.
    LineaMax Comercial.  This service, which is
    offered to business customers, is identical to LineaMax
    Residencial, except that it also includes multi-line hunting.
    CentralMax.  This service provides business
    customers with all the functions of a private branch exchange
    using centrex technology, without having to acquire and maintain
    equipment. The features offered under this product include call
    waiting, call forwarding, three-way calling, direct inward
    dialing, direct outward dialing, intercom dialing, call
    transfer, speed dialing, call hold, call pick up, outgoing call
    blocking, single 22




---



##### Table of Contents



digit access to attendant and distinctive ringing. Optional
    solutions include voice mail,
    music-on-hold,
    multi-line hunting and operator services.  
    Larga Distancia Max.  This service provides
    domestic and international long distance. We do not offer our
    long distance service separately from our local telephony
    service. See Supervision and Regulation of the Mexican
    Telecommunication Industry  Our
    concessions  Long distance for a description of
    significant special charges we would have to pay Telmex if we
    decide to provide long distance service to customers other than
    our local telephony customers.
    TroncalMax Digital.  This service provides
    digital trunks for business customers that need highly reliable
    access to and from the public telephone network through their
    existing Private Branch Exchange (also known as PBX). This
    service is sold in groups of 10, 20 or 30 trunks. The
    groups can be configured with direct inward dial (DID), direct
    outward dial (DOD), caller identification or main telephone
    number assignments.
    TroncalMax Analúogica.  This service,
    which is offered to business customers, provides connectivity to
    analog PBX or key systems. The features available with this
    product are multi-line hunting, caller identification and call
    barring.
    Internet Max.  This service uses a traditional
    POTs line and modem to provide
    dial-up
    Internet access allowing users to navigate on the Internet at
    speeds of up to 56 Kbps, depending on the number of users
    accessing the Internet at the same time, since it is a shared
    service. We provide this service to customers, regardless of
    whether they have a Maxcom line or not.
    SpeediMax(ADSL (128, 256 and 512 Kbps and 1 and
    2 Mbps)). Asymmetric Digital Subscriber Line (also known as
    ADSL) is a transmission service that turns ordinary telephone
    lines into high-speed data connections. It is a digital data
    service that provides telecommuting capabilities at speeds much
    faster than standard modems. With ADSL it is possible to have
    secure, dedicated links to the Internet or a companys LAN
    at a high-speed transmission.
    AsistelMax.  This service, which we launched in
    April 2002, provides basic telephone medical and home assistance
    to our residential customers in case of emergency.
    1-800
    Numbers.  This service is available for our
    customers interested in receiving toll-free calls into their
    call centers or businesses.
    Dedicated Internet Access.  This service offers
    Internet access at high speed within a clear channel access to
    the Internet backbone.
    Digital private lines.  This service provides
    highly reliable dedicated circuits between two or more physical
    locations. Digital private lines are designed to integrate
    voice, data and video private networks over a single physical
    link. Digital private lines are, in effect, leased lines for
    exclusive/private use with no limitations in usage, available
    365 days a year, with no restrictions in amount of traffic.
    Hosted PBX.  This service provides our business
    customers with all the functions of an Internet Protocol PBX (or
    IP/PBX) using VoIP technology, without having to acquire and
    maintain high cost equipment. The features offered under this
    product include CentralMax as well as other Internet Protocol
    enhanced services such as web portal setup, click to
    dial, hosted directory, MS
    Outlook©
    integration, etc.
    I-line.  This service allows our customers to
    make and receive local, international and domestic long distance
    and mobile calls using the Internet. This service includes
    additional voice features such as: call waiting, caller ID and
    voice mail services
    E-Security.  This
    service provides managed security including perimetral
    anti-virus, content filter and spyware solutions. In this sense
    Maxcom supplies all the software and hardware equipment as an
    integrated solution for our customers.
    Opportune Service to Systems.  This service
    provides specialized engineering equipment to supply preventive
    and corrective maintenance to our customers IT equipment. 23




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##### Table of Contents



Pricing
        Marketing
    and sales
  General
  first-to-market
  Sales
    and distribution channels
  door-to-door
  Our
    direct sales approach is to assign sales representatives or
    teams to locations within a cluster or to single
    sites.
       24




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##### Table of Contents



Customer
    service
    
    centralized answering point.  This area
    responds to calls to our customer care telephone numbers in
    Mexico City and the cities of Puebla and Queretaro 24 hours
    a day, seven days a week. Many prospective and existing
    customers use our centralized answering point for all types of
    queries, including queries regarding area codes, rates, billing
    and line installation and changes.
    walk-in center.  We have three walk-in centers
    in Mexico City, three in the City of Puebla and one in the City
    of Queretaro for prospective and existing customers who wish to
    make inquires in person regarding our services. Our hours of
    operation are 9:00 a.m. to 6:00 p.m. on Mondays
    through Fridays and from 9:00 a.m. to 2:00 p.m. on
    Saturdays.
    centralized trouble-shooting center.  This area
    responds to calls in Mexico City and the cities of Puebla and
    Queretaro. This center is available 24 hours a day, seven
    days a week and handles technical problems, inquiries and
    complaints.    Credit,
    billing and collection
        state-of-the-art
       25




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##### Table of Contents



Competition
          Telmex
    Other
    Competitors
      point-to-point point-to-multipoint point-to-point
 26




---



##### Table of Contents



point-to-multipoint point-to-point point-to-point last-mile
        Overview
    of the Mexican telecommunications industry
  General
       27




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##### Table of Contents



Market
    liberalization
    Local telephony market.
  30-year
  last-mile
    
    450 MHz, 1.9 GHz (PCS) and 3.4-3.7 GHz (fixed
    wireless local loop) frequency bands;
    7, 15, 23 and 38 GHz frequency band for nationwide
    point-to-point
    microwave transmission links; and
    10.5 GHz frequency band for regional
    point-to-multipoint
    microwave transmission service.    Long distance telephony market.
  30-year
    
    Alestra, S. de R.L. de C.V.;
    Avantel, S.A. de C.V.; 28




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##### Table of Contents




    Axtel, S.A. de C.V.;
    Iusatel, S.A. de C.V.;
    Marcatel, S.A. de C.V.; and
    Bestel, S.A. de C.V.    Mexican
    market characteristics
  Population and economic growth. Comisión Económica para
    América Latina y el Caribe
  Underserved telephony market.
    Projected growth trends.
      Supervision
    and regulation of the Mexican telecommunications
    industry
  General
  Ley Federal de
    Telecomunicaciones
 29




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##### Table of Contents



Ley de Vías Generales de
    Comunicación Reglamento de Telecomunicaciones
  Comisión Federal de
    Telecomunicaciones
  
    enacting regulations and technical standards for the
    telecommunications industry;
    ensuring that holders fulfill the terms of their concessions and
    permits;
    suspending operators without concessions;
    resolving interconnection controversies between
    competitors; and
    maintaining a registry of applicable rates.      Concessions
    and permits
  General.
  
    the type and technical specifications of the network, system or
    services that may be provided;
    the allocated spectrum frequencies, if applicable;
    the geographical region in which the holder of the concession
    may provide the service;
    the required capital expenditure program;
    the term during which such service may be provided;
    the payment, where applicable, required to be made to acquire
    the concession, including, where applicable, the participation
    of the Mexican government in the revenues of the holder of the
    concession; and
    any other rights and obligations affecting the concession holder.    
    installing, operating or exploiting transmission-ground
    stations; and
    providing telecommunications services as a reseller. 30




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##### Table of Contents



Ownership restrictions. Ley Federal de Inversión Extranjera
  
    Mexican individuals; and
    Mexican corporations in which non-Mexicans own 49% or less of
    the full voting stock and that are not otherwise controlled by
    non-Mexicans.  Secretaría de Economía
    Transfer.
  Termination.
  
    expiration of its term;
    resignation by the concession holder or the permit
    holder;
    revocation.  A concession or a permit
    may be revoked prior to the end of its term under certain
    circumstances, such as:  
    failure to exercise the rights of the concession within
    180 days of the grant;
    failure to provide interconnection services with other holders
    of telecommunications concessions and permits without just cause;
    loss of the concession or permit holders Mexican
    nationality;    (1)
    
    Renewal on an annual basis.  
    unauthorized assignment, transfer or encumbrance of the
    concession or permit;
    unauthorized interruption of service;
    taking any action that impairs the rights of other
    concessionaires or permit holders;
    failure to comply with the obligations or conditions specified
    in the concession or permit; and 31




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##### Table of Contents




    failure to pay to the Mexican government its fee for the
    concession or, where applicable, its participation in the
    revenues of the holder of the concession.      
    expropriation.  The Mexican government
    has the statutory right to permanently expropriate any
    telecommunications concession and claim any related assets for
    reasons of public interest. Under Mexican law, the Mexican
    government is obligated to compensate the owner of such assets
    in the case of a statutory expropriation. The amount of the
    compensation is to be determined by appraisers. If the party
    affected by the expropriation disagrees with the appraisal
    amount, such party may initiate judicial action against the
    government. In such a case, the relevant judicial authority will
    determine the appropriate amount of compensation to be paid. We
    are not aware of any instance in which the SCT has exercised its
    expropriation rights in connection with a telecommunications
    company; and
    dissolution or bankruptcy of the concession holder or the
    permit holder.  Temporary seizure.
  Rates
    for telecommunications services
      Comisión
    Federal de Competencia
   32




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##### Table of Contents



Our
    concessions
  Local telephony.
    
    basic local telephony;
    the sale or lease of network capacity for the generation,
    transmission or reception of signs, signals, writings, images,
    voice, sounds or other information of any nature;
    the purchase and lease of network capacity from other carriers,
    including the lease of digital circuits;
    value-added services;
    operator services;
    data, video, audio and video conference services, except for
    cable or other restricted television, continuous music or
    digital audio;
    credit or debit telephone cards; and
    public telephony.              Long distance.
 33




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##### Table of Contents




    the carrying of switched traffic between two different local
    calling areas that requires the use of a dialing prefix for its
    routing;
    the sale or lease of network capacity for the generation,
    transmission or reception of signs, signals, writings, images,
    voice, sounds or other information of any nature;
    the purchase and lease of network capacity from other carriers;
    and nationwide and international long distance telephony.    
    those which require a concession for frequency bands of the
    radio electric spectrum for specific uses;
    those which require a concession to occupy and exploit
    geostationary orbital positions and satellite orbits assigned to
    Mexico;
    those which require a concession to operate radio or television
    broadcasting systems; and
    cable or other restricted television.                 34




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##### Table of Contents



Microwave
    transmissions. Point-to-point. point-to-point
  
    two consecutive frequency segments in the 15 GHz band, with
    a 56 MHz bandwidth;
    three consecutive frequency segments in the 23 GHz band,
    with a 56 MHz bandwidth; and
    two consecutive frequency segments in the 23 GHz band, with
    a 100 MHz bandwidth.      point-to-point
    Point-to-multipoint. point-to-multipoint
    point-to-multipoint
  point-to-point point-to-multipoint
 35




---



##### Table of Contents



Interconnection
      Local interconnection. local-to-local
        Mobile interconnection.
   36




---



##### Table of Contents



Long distance interconnection.
    Municipal
    and other regulatory approvals
    C.
    Organizational
    structure  sociedad anónima de
    capital variable
            37




---



##### Table of Contents



D.
    Property,
    plant and equipment  and/or
  7-year 5-year
    10-year 5-year
  15-year 15-year
  3-year
 38




---



##### Table of Contents



ITEM 5.
    OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS  All peso amounts discussed in this annual report are
    presented in constant December 31, 2005 pesos in accordance
    with Mexican GAAP, except as otherwise indicated. You should
    read the following discussion and analysis in conjunction with
    the consolidated financial statements included elsewhere in this
    annual report. Unless otherwise indicated, all financial
    information in this annual report is presented in constant pesos
    as of December 31, 2005. The U.S. dollar translations
    provided in this annual report are solely for the convenience of
    the reader and are, unless otherwise indicated, calculated
    utilizing the noon buying rate at December 30, 2005, which
    was Ps.10.63 per U.S.$1.00 as reported by the Federal
    Reserve Bank of New York. Sums may not add due to rounding.
      Bulletin B-10,
    Bulletin B-12, Bulletin B-12
  Bulletin B-10,
  
    net interest expense and interest income;
    net foreign exchange gains or losses; and
    net gains or losses on monetary position.   39




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##### Table of Contents



Recent
    developments
            IP-based
  A.
    Results
    of operations  Overview
    of Maxcom
  IP-based
  last-mile
   40




---



##### Table of Contents



point-to-point point-to-multipoint
  Devaluation
    and inflation
    peso-to-dollar peso-to-dollar
    Gross InternationalMexican GDP


Reserves as of theInflation


Average


Annual Growth


End of Each YearYear Ended December 31

Rate


28-day
    Cetes


Rate


(Billion)1996


27.7
%


31.3
%


5.3
%

$
17.51997


15.7
%


19.8
%


6.8
%

$
28.01998


18.6
%


24.6
%


4.9
%

$
30.11999


12.3
%


21.3
%


3.9
%

$
30.72000


9.0
%


15.3
%


6.6
%

$
35.62001


4.4
%


11.3
%


(2.0
)%

$
44.82002


5.7
%


7.1
%


0.8
%

$
50.72003


4.0
%


6.2
%


1.4
%

$
59.02004


5.2
%


6.8
%


4.2
%

$
64.22005


3.3
%


9.2
%


3.0
%

$
74.1     
    the increase in the peso-carrying costs of our
    U.S. dollar-denominated debt and capital expenditure
    requirements;
    the ensuing decrease in the purchasing power of Mexican
    consumers, which results in a decrease in the demand for
    telephony services; and
    our inability, due to competitive pressures, to increase our
    prices in line with inflation.   41




---



##### Table of Contents



3 4
  Impact of
    foreign currency fluctuations
              Capitalization
    of pre-operating expenses
      Customer
    attrition (churn)
      Year Ended

Average MonthlyDecember 31

Churn Rate2002


2.98
%2003


2.62
%2004


2.01
%2005


1.82
%  42




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##### Table of Contents



Voice,
    data and wholesale revenues
    
    installation charges of voice lines;
    monthly fees for the rental of voice lines, which include,
    depending on the product, a certain number of free local calls;
    usage charges of voice lines, which can be local calls above
    those already included in the monthly fees, long distance
    minutes, as well as minutes to mobile numbers under the Calling
    Party Pays modality;
    charges relating to value-added services such as voice mail,
    call waiting, call forwarding, three-way calling and caller
    identification;
    interconnection fees; and
    the sale of telephone sets.    dial-up
    Average
    Revenue Per User (ARPU)
      Useful
    lives of fixed assets
    Spin-off
    of the Company and sale of subsidiary
   43




---



##### Table of Contents



Results
    of operations
    Year Ended December 312005


2004


2003Net revenues


100
%


100
%


100
%Operating cost and expenses:Network operating costs


33
%


35
%


36
%Selling, general and
    administrative expenses


41
%


43
%


50
%Depreciation and amortization


24
%


39
%


44
%Total operating cost and expenses


99
%


117
%


130
%Operating profit (loss)


1
%


(17
)%


(30
)%Integral (income)/cost of financing


(5
)%


5
%


16
%Special item


1
%


0
%


0
%Other income (expense), net


1
%


0
%


0
%Taxes


2
%


3
%


2
%Net loss for the year


6
%


15
%


48
%  44




---



##### Table of Contents



year-over-year
  Year Ended December 31,





Percentage Change2005


2004


2003


2005/2004


2004/2003(In millions)Net revenues

Ps.
1,150.5


Ps.
897.1


Ps.
832.2



28.2
%


7.8
%Operating cost and expenses:Network operating costs


(383.8
)


(316.6
)


(299.0
)


21.2
%


5.9
%Selling, general and
    administrative expenses


(468.3
)


(386.9
)


(419.0
)


21.0
%


(7.7
)%Depreciation and amortization


(281.6
)


(346.0
)


(365.4
)


(18.6
)%


(5.3
)%Total operating cost and expenses

Ps.
(1,133.7
)

Ps.
(1,049.5
)

Ps.
(1,083.4
)


8.0
%


(3.1
)%Operating profit (loss)

Ps.
16.8


Ps.
(152.4
)

Ps.
(251.2
)


(111.0
)%


(39.3
)%Integral (income) cost of financing


(55.1
)


48.9



(133.7
)


(212.7
)%


(136.6
)%Special item


(15.4
)


0.0



0.0



n/a



n/aOther income(expense), net


9.0



(0.8
)


(0.2
)


(1225.0
)%


300.0
%Taxes


(26.6
)


(29.0
)


(14.0
)


(8.3
)%


107.1
%Net loss for the year

Ps.
(71.3
)

Ps.
(133.3
)

Ps.
(399.1
)


(46.5
)%


(66.6
)%   Year
    ended December 31, 2005 compared to year ended
    December 31, 2004
  Net
    revenues
            Year Ended December 312005


2004(In millions)Voice

Ps.
930.2


Ps.
739.4Data


51.4



43.2Wholesale


168.9



114.6Total revenues

Ps.
1,150.5


Ps.
897.2  45




---



##### Table of Contents



ARPU2005


2004


%(In U.S. dollars)BusinessMonthly charges

$
22.3


$
22.9



(2
)%Usage


53.9



54.9



(2
)%Subtotal


76.2



77.8



(2
)%Non-recurring


1.4



3.6



(60
)%Total business

$
77.6


$
81.4



(5
)%ResidentialMonthly charges

$
16.3


$
17.6



(8
)%Usage


12.1



13.6



(11
)%Subtotal


28.4



31.2



(9
)%Non-recurring


3.0



2.0



47
%Total residential

$
31.4


$
33.2



(6
)%CompanyMonthly charges

$
17.1


$
18.6



(8
)%Usage


22.4



21.6



4
%Subtotal


39.5



40.2



(2
)%Non-recurring


2.7



2.3



14
%Total company

$
42.2


$
42.5



(1
)%         At December 312005


2004


%Voice lines:Business lines


36,680



28,249



30
%Residential lines


154,233



125,934



22
%Public Telephony


5,289



492



975
%Wholesale lines


10,090



10,220



(1
)%Total lines


206,292



164,895



25
%  46




---



##### Table of Contents



Operating
    costs and expenses
    
    network operating costs which, include technical expenses
    (comprised of electric power, site leases and maintenance of
    telecommunications equipment), installation expenses, when
    applicable and disconnection expenses;
    selling, general and administrative expenses, which primarily
    included salaries, wages and benefits; consulting fees, which
    primarily related to consulting services and general legal and
    accounting fees; leasing costs which primarily related to our
    headquarters, warehouses, and other facilities; marketing
    expenses which primarily related to the implementation of our
    branding campaign, general advertising and promotions; and
    provisioning for bad debt; and
    depreciation and amortization mainly related to pre-operating
    expenses, frequency rights, telephone network systems and
    equipment and intangibles.    
    a Ps.53.0 million, or 23.9%, increase in network operating
    services resulting mainly from (i) a Ps.30.4 million
    increase in
    local-to-mobile
    interconnection costs associated with a significant increase in
    local-to-mobile
    traffic, together with a Ps13.7 million increase in long
    distance interconnection as a result of increased long distance
    traffic, (ii) Ps.6.0 million costs associated with the
    operation of the CATV network, (iii) Ps.4.0 million
    increase in costs related to the lease of ports and circuits
    required for our backbone and last mile connectivity as a result
    of the growth of our network, and, (iv) Ps.1.0 million
    lower other costs, primarily the reduction of internet service
    costs as a result of lower rates obtained from new suppliers of
    internet access;
    a Ps9.8 million, or 11.8% increase in technical expenses
    primarily due to (i) a 12.2% increase, or
    Ps$4.3 million in maintenance as a result of our larger
    telephone network, (ii) a Ps$2.2 million, or 7.8%
    increase in leases of sites and expenses related to the
    operation of our telephone network, and
    (iii) Ps.3.3 million in other expenses;
    a Ps.64.4 million, or 18.6%, decrease in depreciation and
    amortization mainly related to the modification of the remaining
    useful lives and recalculation of the depreciation for the year
    2005; and
    a Ps.4.3 million, or 37.3%, increase in installation
    expenses basically as a result of lines installed on the CATV
    network. As a result of competitive pressures we have waived and
    will waive installation charges to our customers (we record
    installation expense at the time of installation only when we
    bill our customers for installation fees, and during 2004 and
    2005 we waived installation fees in many instances due to
    competitive pressures), otherwise we capitalize and amortize the
    installation costs.     47




---



##### Table of Contents



Integral
    cost of financing
    Year Ended December 312005


2004(In millions)Interest paid  Net

Ps.
(97.1
)

Ps.
(38.7
)Exchange gain (loss) 
    Net


20.0



(1.5
)Gain on monetary position


22.1



89.0Integral cost of financing

Ps.
(55.0
)

Ps.
48.8           Tax
    provisions
        Year
    ended December 31, 2004 compared to year ended
    December 31, 2003
  Net
    revenues
     48




---



##### Table of Contents



Year Ended December 312004


2003(In millions)Voice

Ps.
739.4


Ps.
691.2Data


43.2



48.7Wholesale


114.6



92.4Total revenues

Ps.
897.2


Ps.
832.3     ARPU2004


2003


%(In U.S. dollars)BusinessMonthly charges

$
22.9


$
26.6



(14
)%Usage


54.9



56.6



(3
)%Subtotal


77.8



83.3



(7
)%Non-recurring


3.6



3.3



(9
)%Total business

$
81.4


$
86.5



(6
)%ResidentialMonthly charges

$
17.6


$
18.4



(4
)%Usage


13.6



13.4



2
%Subtotal


31.2



31.7



(2
)%Non-recurring


2.0



1.3



56
%Total residential

$
33.2


$
33.0



1
%CompanyMonthly charges

$
18.6


$
19.9



(7
)%Usage


21.6



21.4



1
%Subtotal


40.2



41.3



(3
)%Non-recurring


2.3



1.7



34
%Total company

$
42.5


$
43.0



(1
)%      49




---



##### Table of Contents



At December 312004


2003


%Voice lines:Business lines


28,249



24,305



16
%Residential lines


125,934



106,389



18
%Public telephony


492







N/AWholesale lines


10,220



6,850



49
%Total lines


164,895



137,544



20
%   Operating
    costs and expenses
    
    a Ps.15.7 million, or 7.6% increase in network operating
    costs resulting mainly from (i) a Ps.14.5 million
    increase in
    local-to-mobile
    interconnection costs associated with significant increases in
    local-to-mobile
    traffic, partially offset by a Ps.4.5 million decrease in
    long distance interconnection as a result of lower per-minute
    rates obtained from several carriers and improved routing of our
    long distance traffic, (ii) Ps.6.6 million increase in
    costs related to the lease of circuits required for our backbone
    and last mile connectivity as a result of the growth of our
    network, and (iii) Ps.0.9 million lower other costs,
    primarily the reduction of internet service costs as a result of
    lower rates obtained from new suppliers of internet access;
    a Ps. 17.6 million or 26.7% increase in technical
    expenses primarily due to (i) a 46.9% increase, or
    Ps.11.3 million in maintenance as a result of our larger
    telephone network, and (ii) a Ps. 6.3 million, or
    15.1% increase in leases of sites and expenses related to the
    operation of our network;
    a Ps.19.3 million, or 5.3% decrease in depreciation and
    amortization related to the termination of the depreciation of
    some assets with short expected life period such as electronic
    and computing equipment and software; and
    a Ps.15.7 million, or 57.4% reduction in installation
    expenses due to waivers of installation charges granted as a
    result of competitive pressures (we record installation expense
    at the time of installation only when we bill our customers for
    installation fees, and during 2003 and 2004 we waived
    installation fees in many instances due to competitive
    pressures). Through December 31, 2002, when we waived
    installation costs to our customers, installation costs were
    capitalized and amortized on a straight-line basis over a period
    of 20 years. Beginning in 2003, when we waive installation
    costs, we capitalize and amortize such costs on a straight-line
    basis over a period equal to the remaining original term of the
    microwave concessions, which expires in October 2017.  sub-leases
   50




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##### Table of Contents



Integral
    cost of financing
    Year Ended December 312004


2003(In millions)Interest paid  Net

Ps.
(38.7
)

Ps.
(28.3
)Exchange gain (loss) 
    Net


(1.5
)


(188.2
)Gain on monetary position


89.0



82.8Integral cost of financing

Ps.
48.8


Ps.
133.7           Asset
    tax
    Critical
    accounting policies
  Applications
    of critical accounting policies and estimates.
   51




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##### Table of Contents




    it requires us to make assumptions because information was not
    available at the time or it included matters that were highly
    uncertain at the time we were making the estimate, and
    changes in the estimate or different estimates that we could
    have selected would have had a material impact on our financial
    condition or results of operations.  Allowance
    of doubtful accounts receivable
      Revenue
    recognition
         52




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##### Table of Contents



Installation
    revenues and costs
      Valuation
    of long-lived assets
   53




---



##### Table of Contents



Deferred
    taxes
      Principal
    differences between Mexican GAAP and U.S. GAAP
    Recent
    United States accounting pronouncements
   54




---



##### Table of Contents



No. 05-06, No. 05-06 No. 05-06 No. 05-06
  No. FAS 13-1, No. FAS 13-1 FAS 13-1 No. FAS 13-1 FAS No. 13-1
    Recent
    Mexican accounting pronouncements
        
    NIFs and Interpretations of NIFs issued by the CINIF.
    Bulletins issued by the Accounting Principles Board of the
    Mexican Institute of Public Accountants (IMCP) that have not
    been modified, replaced or repealed by the new NIFs.
    The supplementary IFRS that are applicable. 55




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##### Table of Contents



A-1
  A-2
  A-3
  A-4
  A-5
  A-6
  A-7
  A-8
    B.
    Liquidity
    and capital resources  Financing
    sources and liquidity
  start-up
  
    U.S.$100.0 million vendor financing facility from Nissho
    Iwai American Corporation, bearing an annual interest rate of
    three-month LIBOR plus 4.15% due August 12, 2005. Funds
    from this facility were used to purchase Lucent Technologies
    equipment. We used U.S.$72.3 million of proceeds from the
    sale of the
    133/4
    notes on March 17, 2000 to repay all amounts outstanding in
    full and terminated this facility.
    U.S.$20.0 million vendor financing facility from Nissho
    Iwai American Corporation, bearing an annual interest rate of
    three-month LIBOR plus 4.15% due August 12, 2005. Funds
    from this facility were used to purchase NEC equipment. We used
    U.S.$13.9 million of proceeds from the sale of the
    133/4% notes
    on March 17, 2000 to repay all amounts outstanding in full
    and terminated this facility.
    U.S.$18.7 million vendor financing from Hewlett Packard de
    México, bearing an annual interest rate of three-month
    LIBOR plus 4.15% due November 25, 2005. We used
    U.S.$16.3 million of proceeds from the sale of the
    133/4% notes on March 17, 2000 to repay all amounts
    outstanding in full and terminated this facility.
    U.S.$70.0 million raised from private equity investors
    since inception through May 1998.  3 4 3 4 3 4 3 4 3 4
    3 4
   56




---



##### Table of Contents




    Holders tendered an aggregate of U.S.$259,410,000 in principal
    amount of
    133/4% notes
    in exchange for an aggregate of (i) U.S.$165,078,150 in
    principal amount of old notes, and (ii) 26,459,820
    series N-2
    convertible preferred shares, with an initial liquidation
    preference of U.S.$0.4927 per share and limited voting
    rights, represented by ordinary participation certificates or
    CPOs, which represented in the aggregate 15.2% of
    our then total capital stock;
    Existing and new shareholders invested U.S.$66.2 million
    and received preferred shares (more fully described in
    Principal Shareholders), which represented in the
    aggregate 77.0% of our then total capital stock; and
    Our capital structure was restructured as more fully described
    in Item 7. Major Shareholders and Related Party
    Transactions-A. Major shareholders and share ownership-The
    capital restructuring.  3 4 3 4 3 4 3 4
    Tasa de Interés
    Interbancaria de Equilibrio
    
    Holders tendered an aggregate of U.S.$162,505,711 in principal
    amount of old notes in exchange for an aggregate of
    (i) U.S.$36,117,789 in principal amount of new notes due
    2009, bearing an annual interest rate of 4.00% from
    October 8, 2004 through April 14, 2005, 5.75% from
    April 15, 2005 through October 14, 2005, 7.75% from
    October 15, 2005 through April 14, 2006, 8.25% from
    April 15, 2006 though October 14, 2006, 9.25% from
    October 5, 2006 through October 14, 2007, 10.25% from
    October 15, 2007 through October 14, 2008, and 11.25%
    from October 15, 2008 through October 14, 2009, and
    (ii) 101,110,338 shares of our
    Series N-1
    Preferred Shares;
    Maxcom received consents to the amendment of certain restrictive
    covenants of the indenture governing the old notes representing
    92.0% of the total principal amount of outstanding old notes
    (other than old notes held by Maxcom or any affiliate of
    Maxcom), therefore fulfilling the condition for the adoption of
    the proposed amendments. 57




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##### Table of Contents



DEBT MATURITY DATESMarch-07


April-07


October-09


Total(Thousands of U.S. Dollars)Before October 8, 2004:133/4% notes






11,590







11,590old notes


167,624











167,624Total


167,624



11,590







179,214After October 8, 2004:133/4% notes






11,590







11,590old notes


5,118











5,118new notes










36,118



36,118Total


5,118



11,590



36,118



52,826       12-month
        Indebtedness
   58




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##### Table of Contents



Year Ended December 312005


2004(In millions)SHORT TERM COMMERCIAL PAPER
    DENOMINATED IN PESOSShort term commercial paper

Ps.
150,000Accrued interest


1,500Total short term commercial paper
    denominated in pesos

Ps.
151,500BANK LOANS DENOMINATED IN PESOSShort-term portion:IXE Banco, S. A

Ps.
47,573Banco Mercantil del Norte, S. A


19,075Banco Santander Serfin, S. A





Ps.
150,443Total short term

Ps.
66,648


Ps.
150,443Long-term portion:IXE Banco, S. A

Ps.
25,026


Ps.Banco Mercantil del Norte, S. A


54,046Banco Santander Serfin, S. A






28,711Total long term

Ps.
79,072


Ps.
28,711Total bank loans denominated in
    pesos

Ps.
145,720


Ps.
179,154   Year Ended December 312005


2004(In millions)LONG TERM PAYABLE BONDS
    DENOMINATED IN U.S. DOLLARS$5,118 old notes (issued in
    connection with the 2002 recapitalization) with maturity in
    2007, bearing interest at 0% until March of 2006, and as of the
    last year, will bear interest at a rate of 10%

Ps.
54,818


Ps.
59,573$36,118 new notes (issued in
    connection with 2004 recapitalization) bearing a variable
    interest rate of 4% to 11.25% until October of 2009


386,853



420,420$11,590:
    133/4
    notes (issued on March the
    17th of
    2000) bearing interest at a rate of 13.75%, with maturity
    date on April the
    1st of
    2007


124,139



134,910Accrued interest


12,103



8,793Less: Discount (net of accumulated
    amortization)


(1,005
)


(1,684
)Total Long term payable bonds
    denominated in U.S. dollars

Ps.
576,908


Ps.
622,012   3 4 3 4 3 4 3 4
 59




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##### Table of Contents



3 4 Series N-1 3 4
    Debt Maturity DatesMarch-07


April-07


October-09


Total(Thousands of U.S. Dollars)Before the 2004 recapitalization:133/4% notes






11,590







11,590old notes


167,624











167,624Total


167,624



11,590







179,214After the 2004 recapitalization:133/4% notes






11,590







11,590old notes


5,118











5,118new notes










36,118



36,118Total


5,118



11,590



36,118



52,826   3 4
  gross-up
 60




---



##### Table of Contents



3 4 3 4 gross-up
  Resources
    from Operating, Financing and Investing activities
      Resources
    used for operating activities
                       61




---



##### Table of Contents



Resources
    provided by financing activities
                    Resources
    used for investing activities
     62




---



##### Table of Contents



Other
    contractual obligations
      5-year 5-year
      2010 &2006


2007


2008


2009


thereafter(In thousands of Pesos)Facilities

Ps.
4,822


Ps.
4,695


Ps.
2,900


Ps.
1,407


Ps.
6,303Sites


16,437



12,600



11,017



7,433



21,748Poles


7,866



7,866



7,866



7,866



7,866Others


2,197















Total

Ps.
31,322


Ps.
25,161


Ps.
21,783


Ps.
16,706


Ps.
35,917     2010 &2006


2007


2008


2009


Thereafter(In thousands of U.S. dollars)Corporate headquarters

$
1,759


$
1,806


$
1,849


$
1,897


$
5,981Sites


385



385



360



112



90Total

$
2,144


$
2,191


$
2,209


$
2,009


$
6,071     2010 &2006


2007


2008


2009


thereafter(In thousands of Pesos)Corporate equipment(1)

Ps.
244


Ps.



Ps.



Ps.



Ps.
Network(1)


540















Total

Ps.
784


Ps.



Ps.



Ps.



Ps.     (1)
    
    Renewal on an annual basis. 63




---



##### Table of Contents



2010 &2006


2007


2008


2009


thereafter(In thousands of U.S. dollars)Telephone equipment(1)

$
1,800


$



$



$



$
Fiber optic


882



882



882



882



10,579
(2)Software(1)


1,255















Total

$
3,937


$
882


$
882


$
882


$
10,579     (1)
    
    Renewal on an annual basis.(2)
    
    Included until 2022.      2006

Ps.
4,0322007


3,6452008 and thereafter:


3,324Total(*)

Ps.
11,001     (*)
    Includes interest to be accrued in Ps.2,279.    2006

$
8792007


3632008 and thereafter:


134Total(*)

$
1,376     (*)
    Includes interest to be accrued in $7.    2010 &March-07


April-07


October-09


thereafter(Thousands of U.S. Dollars)Before October 8, 2004:13.3/4% notes






11,590







old notes


167,624











Total


167,624



11,590







After October 8, 2004:13.3/4% notes






11,590







old notes


5,118











5,118new notes










36,118



36,118Total


5,118



11,590



36,118



52,826  64




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##### Table of Contents



Capital
    expenditures
  3 4
    Dividend
    policy
    
    a minimum consolidated leverage ratio of less than 3.75 to 1.00;
    a minimum fixed charge coverage ratio of 2.00 to 1.00;
    no default (as defined in the indenture) must have occurred and
    be continuing or result from the payment of the cash
    dividend; and
    the cash dividend payments do not exceed an amount determined in
    the indenture based on, among other things, cash flow generated
    from operations or equity offerings and consolidated interest
    expense.  C.
    Research
    and development, patents and licenses, etc.    D.
    Trend
    information    
    The growth in broadband access;
    The convergence of services and industries, as evidenced by the
    introduction of voice, data and video bundles in the market:
    Multi-service IP services;
    Mobile services.      E.
    Off 
    balance sheet arrangements   65




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##### Table of Contents



F.
    Tabular
    disclosure of contractual obligations    2006


2007


2008


2009


2010 & thereafter(In thousands of Pesos)Facilities

Ps.
4,822


Ps.
4,695


Ps.
2,900


Ps.
1,407


Ps.
6,303Sites


16,437



12,600



11,017



7,433



21,748Poles


7,866



7,866



7,866



7,866



7,866Others


2,197Total

Ps.
31,322


Ps.
25,161


Ps.
21,783


Ps.
16,706


Ps.
35,917     2010 &2006


2007


2008


2009


Thereafter(In thousands of U.S. dollars)Corporate headquarters

$
1,759


$
1,806


$
1,849


$
1,897


$
5,981Sites


385



385



360



112



90Poles OthersTotal

$
2,144


$
2,191


$
2,209


$
2,009


$
6,071     2010 &2006


2007


2008


2009


thereafter(In thousands of Pesos)Corporate equipment(1)

Ps.
244


Ps.



Ps.



Ps.



Ps.Network(1)


540Total

Ps.
784


Ps.



Ps.



Ps.



Ps.     (1)
    
    Renewal on an annual basis.    2010 &2006


2007


2008


2009


Thereafter(In thousands of U.S. dollars)Telephone equipment(1)

$
1,800


$



$



$



$Fiber optic


882



882



882



882



10,579
(2)Software(1)


1,255Total

$
3,937


$
882


$
882


$
882


$
10,579     (1)
    
    Renewal on an annual basis.(2)
    
    Included until 2022. 66




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##### Table of Contents



2008 &2006


2007


ThereafterDenominated in Pesos


4,032



3,645



3,324Denominated in dollars


879



363



134   ITEM 6.
    DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES  A.
    Directors
    and Senior Management  Directors
  A-1 shareholders,
  Series N-2 shareholders series N-2 series N-2 series N-2 shareholders series N-2 shares
    Name

Position

AgeAdrian Aguirre Gomez

Series A and
    A-1 Director and Chairman of the Board


55Lauro Gonzalez Moreno

Series A and A-1 Director


44Maria Guadalupe Aguirre Gomez

Series A and A-1 Director


56Marco Provencio Muñoz

Series A and A-1 Director


47Rodrigo Guerra Botello

Series A and A-1 Director


63Roberto Chute

Series B and B-1 Director


32Jacques Gliksberg

Series B and B-1 Director


48Marco Viola

Series B and B-1 Director


40Sebastián Valdéz

Series B and B-1 Director


44   A-1 directors
   67




---



##### Table of Contents



Series N-2 shareholders
      Adrián Aguirre Gómez A-1 director
  Lauro Gonzalez Moreno, A-1 director
  María Guadalupe Aguirre Gómez A-1 director
  Marco Provencio Muñoz A-1 director
  Rodrigo Guerra Botello A-1 director
    Jacques Gliksberg
 68




---



##### Table of Contents



Roberto Chute
  Marco Viola
  Sebastián Valdez
  Executive
    officers
             69




---



##### Table of Contents



Name

Position

AgeRené Sagastuy

President and Chief Executive
    Officer


45José Antonio Solbes

Chief Financial Officer


40Ricardo Arévalo Ruiz

Chief Operating and Information
    Technology Officer


41Alejandro Díaz y Díaz

Vice president of Sales and
    Marketing


36     René Sagastuy
  José Antonio Solbes
  Ricardo Arévalo Ruiz
  Alejandro Díaz y Díaz,
  B.
    Compensation  General
   70




---



##### Table of Contents



series N-1 shares, series N-1 shares
  series N-1 shares,
  Old
    executive stock option plan
            New
    executive stock option plan
           71




---



##### Table of Contents



C.
    Board
    practices        Ley General de Sociedades
    Mercantiles comisario
      D.
    Employees  Sindicato Nacional de Trabajadores de
    Telecomunicaciones, Telefonía, Comunicaciones,
    Cibernética, Productos Eléctricos, Electrónicos,
    Similares y Conexos de la República Mexicana
    E.
    Share
    ownership  BASCF-Maxcom
   72




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##### Table of Contents



ITEM 7.
    MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS  A.  Major
    shareholders and share ownership
    ShareholdersBanc AmericaAguirre Gómez


Equity


OtherShares

Family(1)


Partners(2)


Investors


SubtotalSeries A SharesNumber of shares


4,508,644











4,508,644Percentage owned


100.00
%










100.00
%Series A-1 SharesNumber of shares


6,088,896











6,088,896Percentage owned


100.00
%










100.00
%Series B-1 SharesNumber of shares






10,089,375



92,575



10,181,950Percentage owned






99.09
%


0.91
%


100.00
%Series N SharesNumber of shares


42,052



3,505,738



5,314,044
(4)


8,861,834Percentage owned


0.47
%


39.56
%


59.97
%


100.00
%Series N-1 SharesNumber of shares






217,207,981



3,506,893
(4)


220,714,874Percentage owned






98.41
%


1.59
%


100.00
%Series N-2 Shares(3)Number of shares










26,867,820



26,867,820Percentage owned










100.00
%


100.00
%TotalNumber of shares


10,639,592



230,803,094



35,781,332



277,224,018Percentage owned


3.84
%


83.26
%


12.91
%


100.00
%     (1)
    
    The shares of Maxcom controlled by the Aguirre Gomez family are
    held individually or through trusts or corporations (Adrian
    Aguirre Gomez 1,254,997 Series A, 1,522,224
    Series A-1
    and 42,052 Series N Shares; Maria Guadalupe Aguirre Gomez
    1,084,549 Series A, 1,522,224
    Series A-1 Shares,
    Maria Elena Aguirre Gómez 1,084,549 Series A,
    1,522,224
    Series A-1 Shares 1,084,548
    Series A, 1,522,224
    Series A-1 Shares
    and Maria Trinidad Aguirre Gómez 1,084,549 Series A,
    1,522,224
    Series A-1 Shares).
    As part of the 2004 restructuring, the Aguirre Gùomez
    family exchanged i) 1,226,373 of our series B common
    shares for 1,226,373 of our series A common shares, and
    ii) 2,055,843 of our series N shares for 2,055,843 of
    our series A shares.(2)
    
    The shares of Maxcom controlled by Banc America Equity Partners
    are held through (i) Nexus-Maxcom Holdings I, LLC,
    which holds 166,408,377 shares or approximately 60.3% of
    the total outstanding capital stock,
    (ii) BASCF-Maxcom
    Holding I, LLC which holds 60,888,979 shares or
    approximately 21.96% of the total outstanding capital stock,
    (iii) BAS Capital Funding Corporation, which holds
    3,155,164 shares or approximately 1.14%, and
    (iv) BankAmerica Investment Corporation, which holds
    approximately 0.13% of the total outstanding capital stock. As
    part of the 2004 restructuring the entities controlled by Banc
    America Equity Partners exchanged 4,333,741 of our
    series N-1 shares
    for 4,333,741 of our
    series B-1 shares.(3)
    
    The
    series N-2 shares
    were originally issued to the bondholders who participated in
    our debt restructuring. During 2003 Nexus   Maxcom
    Holdings I, LLC acquired an amount of approximately 75% of
    the old notes, as well as a similar percentage of
    series N-2 shares,
    which are now beneficially owned by Nexus  Maxcom
    Holdings I, LLC. See Item 5 
    Operating and Financial Review and Prospects  Debt
    restructuring and 73




---



##### Table of Contents



recapitalization. Additionally, during 2003
    Nexus  Maxcom Holdings I, LLC acquired
    Series B-1
    and
    N-1 shares
    previously held by Morgan Stanley Asset Management, Caxton
    International and Credit Suisse First Boston Corporation.(4)
    
    As part of the agreements made between some of our current
    officers which also held shares, in February 2005 Rene Sagastuy
    Ferrándiz, our Chief Executive Officer, Ricardo
    Arévalo, our Chief Operation and Information Technology
    Officer and, Rogelio Espinosa Cantellano, head of the Strategic
    Negotiations Direction exchanged an aggregate amount of
    1,469,836 of our series N shares for 1,469,836 of our
    series N-1 shares.  series N-1 shares.
  The 2002
    and 2004 capital restructurings
  Dirección General de
    Inversión Extranjera
    
    Series A-1
    common voting shares with preferred liquidation rights;
    Series B-1
    common voting shares with preferred liquidation rights;
    Series N-1
    preferred shares with limited voting rights; and
    Series N-2
    preferred shares with limited voting rights.  series A-1 A-1 A-1
  A-1 shares, series B-1
  series N-2 series N-2 series N-2
    
    Holders tendered an aggregate of U.S.$162,505,711 in principal
    amount of old notes in exchange for an aggregate of
    (i) U.S.$36,117,789 in principal amount of new notes,
    bearing an annual interest rate of 4.00% from October 8,
    2004 through April 14, 2005, 5.75% from April 15, 2005
    through October 14, 2005, 7.75% from October 15, 2005
    through April 14, 2006, 8.25% from April 15, 2006
    though October 14, 2006, 9.25% from October 5, 2006
    through October 14, 2007, 10.25% from October 15, 2007
    through October 14, 2008, and 11.25% from October 15,
    2008 through October 14, 2009 (the new notes),
    and (ii) 101,110,338 shares of our
    Series N-1
    Preferred Shares; 74




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##### Table of Contents




    Maxcom received consents to the amendment of certain restrictive
    covenants of the indenture governing the old notes representing
    92.0% of the total principal amount of outstanding old notes
    (other than old notes held by Maxcom or any affiliate of
    Maxcom), therefore fulfilling the condition for the adoption of
    the proposed amendments.  Outstanding
    options and warrants
  series N-1 shares series N-1 share.
  Type

ExerciseNumber of


of

Price


ExpirationName of Option Holder

Options


Share

per Share


Date(US$)Bachow & Associates, Inc.
    (strategic assistance services)(1)


442,312


N


3.60




(9)Amsterdam Pacific LLC


24,426


N


8.70



Not Applicable1998-2000
    Executive Stock Option Plan


575,000


N


8.70 to 12.55



20142001-2003
    Executive Stock Option Plan(8)


17,998,500


N-1


0.50



2015UBS Warburg LLC(2)


89,244


N


0.01



2007Donaldson, Lufkin &
    Jenrette Securities Corporation(2)


22,312


N


0.01



2007133/4% notes
    warrantholders(3)


764,938


N


0.01



2007Adrián Aguirre(4)


3,626,959


N-1


0.49



2012Signing bonus reserve for new
    officers


246,215


N-1


0.01



Not ApplicableBAS Capital Funding Corporation
    (management services)(5)


249,781


N-1


0.01



Not ApplicableBankAmerica Investment Corporation
    (management services)(6)


27,754


N-1


0.01



Not ApplicableBachow & Associates, Inc.
    (management services)(7)


277,535


N-1


0.01



Not ApplicableDirectors and committee members
    compensation


684,199


N-1


0.01



1 year after grantingTotal


24,929,175     (1)
    
    We issued options to purchase up to 100,000 series N shares
    at U.S.$8.70 per share in May 1998 as compensation for
    strategic assistance services. Pursuant to our 2002
    recapitalization, we issued options to purchase up to an
    additional 342,312 series N shares at an exercise price of
    U.S.$3.06 per share and reduced the exercise price of the
    original options to U.S.$3.06 per share as partial
    anti-dilution protection.(2)
    
    These warrants were issued in March 2000 as partial compensation
    for underwriting services related to the issuance of units
    comprised of our
    133/4% notes
    and warrants.(3)
    
    These warrants were issued as part of the March 2000 offering of
    our units comprised of our
    133/4% notes
    and warrants.(4)
    
    We issued options to purchase up to 375,000 series N shares
    at a strike price varying between U.S.$8.70 and
    U.S.$12.55 per share pursuant to the old executive stock
    option plan described in Management 
    Compensation  Old Executive Stock Option Plan.
    Pursuant to our 2002 recapitalization, we issued options to
    purchase up to 3,251,959 series N shares at an exercise
    price of U.S.$0.49 and reduced the exercise price of the
    original options to U.S.$0.49 per share as partial
    anti-dilution protection. Pursuant to a shareholders meeting
    held on December 17, 2004 we authorized an amendment to the
    existing options and warrants issued in 75




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##### Table of Contents



connection with employee compensation plans or management
    services to change the underlying value of the options from N to
    N-1 preferred shares.(5)
    
    We issued options to purchase up to 42,300 series N shares
    at U.S.$0.01 per share in May 2001 as compensation for
    management services provided during 2000. Pursuant to our 2002
    recapitalization, we issued options to purchase up to an
    additional 207,481 series N shares at an exercise price of
    U.S.$0.01 per share as partial
    anti-dilution
    protection. Pursuant to a shareholders meeting held on
    December 17, 2004 we authorized an amendment to the
    existing options and warrants issued in connection with employee
    compensation plans or management services to change the
    underlying value of the options from N to N-1 preferred shares.(6)
    
    We issued options to purchase up to 4,700 series N shares
    at U.S.$0.01 per share in May 2001 as compensation for
    management services provided during 2000. Pursuant to our 2002
    recapitalization, we issued options to purchase up to an
    additional 23,053 series N shares at an exercise price of
    U.S.$0.01 per share as partial anti-dilution protection.
    Pursuant to a shareholders meeting held on December 17,
    2004 we authorized an amendment to the existing options and
    warrants issued in connection with employee compensation plans
    or management services to change the underlying value of the
    options from N to N-1 preferred shares.(7)
    
    We issued options to purchase up to 47,000 series N shares
    at U.S.$0.01 per share in May 2001 as compensation for
    management services provided during 2000. Pursuant to our 2002
    recapitalization, we issued options to purchase up to an
    additional 230,535 series N shares at an exercise price of
    U.S.$0.01 per share as partial anti-dilution protection.
    Pursuant to a shareholders meeting held on December 17,
    2004 we authorized an amendment to the existing options and
    warrants issued in connection with employee compensation plans
    or management services to change the underlying value of the
    options from N to N-1 preferred shares.(8)
    
    The board has authorized that up to three million options to
    purchase
    Series N-1 shares
    be granted to key officers in connection with a change of
    control as part of the severance package agreements.(9)
    
    Options expire 2 years after holders have disposed all of
    their ownership interest.        Securityholders
    agreement
    series A-1 series B-1 series N-1 series A-1 series B-1 series N-1
  series A-1
 76




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##### Table of Contents



series B-1
  series A-1,
    B.
    Related
    party transactions  General
    policy
    Operation
    services
  start-up
  start-up
  Strategic
    assistance services
    
    develop and implement a budget model template for our annual
    operating and capital budgets;
    evaluate and assist in the choice and implementation of a
    financial accounting system;
    develop a template for the monthly board of directors
    operational reporting package;
    evaluate and assist in the choice and implementation of a
    customer billing system;
    design a sales and marketing plan; and
    provide training and guidance to our Chief Financial Officer.   77




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Advertising
  series A-1 shares
  Management
    services
      Spin-off
    and sale of subsidiary
      C.
    Interest
    of experts and counsel    ITEM 8.
    FINANCIAL
    INFORMATION  A.
    Consolidated
    statements and other financial information  Financial
    statements
    Legal
    proceedings
  Significant
    unpaid receivable
   78




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##### Table of Contents



Dividend
    policy
    
    minimum consolidated leverage ratio of less than 3.75 to 1.00;
    a minimum fixed charge coverage ratio of 2.00 to 1.00;
    no default (as defined in the indenture) must have occurred and
    be continuing or result from the payment of the cash
    dividend; and
    the cash dividend payments do not exceed an amount determined in
    the indenture based on, among other things, cash flow generated
    from operations or equity offerings and consolidated interest
    expense.  B.
    Significant
    changes    ITEM 9.
    THE
    OFFER AND LISTING  A.
    Offer and
    listing details    B.
    Plan of
    distribution    C.
    Markets    D.
    Selling
    shareholders    E.
    Dilution    F.
    Expenses
    of the issue    ITEM 10.
    ADDITIONAL
    INFORMATION  A.
    Share
    capital    B.
    Memorandum
    and articles of association  General
  sociedad anónima de capital variable
 79




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##### Table of Contents



% of TotalNumber


CapitalClass of Shares

of Shares


StructureSeries A


4,508,644



1.62
%Series A-1
    Preferred Shares


6,088,896



2.19
%Series B-1
    Preferred Shares


10,181,950



3.67
%Series N


8,861,834



3.72
%Series N-1
    Preferred Shares


220,714,874



79.08
%Series N-2
    Preferred Shares


26,867,820



9.69
%Total


277,224,018



100.0
%   Dirección General de
    Inversión Extranjera
  series A-1, series A-1 series N-1 series N-1 series N-2 series N-2 series N-2
  C/N one-to-one
  series A-1 series A-1 shares series B-1
  series N-1 shares series B-1 shares
  Voting
    rights
  series A-1 series B-1 series A-1 series B-1
 80




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##### Table of Contents



series N-1
  series N-1
  
    any amendment to the by-laws that adversely and
    disproportionately affects the economic characteristics (i.e.,
    conversion right, liquidation right and dividend right) of the
    series N-1
    preferred shares as compared to the
    series N-2
    preferred shares; and
    any amendment to the section of the by-laws relating to the
    voting rights of
    series N-1
    preferred shares.  series N-2
  
    determining whether a sale of all or substantially all of the
    consolidated assets of Maxcom or a merger, recapitalization,
    reorganization or consolidation of Maxcom, immediately after
    which the shareholders of Maxcom beneficially own less than 50%
    of the voting power or equity securities of the surviving entity
    will not be deemed a liquidation event with respect to the
    series N-2
    preferred shares;
    any amendment to the by-laws that adversely and
    disproportionately affects the economic characteristics (i.e.,
    conversion right, liquidation right and dividend right) of the
    series N-2
    preferred shares as compared to the
    series N-1
    preferred shares;
    any amendment to the by-laws that adversely affects the right of
    the holders of a majority of the
    series N-2
    preferred shares to designate an observer (or, in the
    circumstance described below, a member) to the board of
    directors;
    any amendment to the by-laws that adversely affects the rights
    of the observer designated by the
    series N-2
    preferred shares to receive, subject to any restrictions imposed
    by applicable law, copies of any written materials distributed
    to the holders of series A and B shares and
    series A-1
    and B-1 preferred shares simultaneously with such holders;
    certain amendments to the by-laws that impose additional
    transfer restrictions or conditions on the
    series N-2
    preferred shares, except to the extent necessary to comply with
    applicable law;
    any amendment to the by-laws that adversely affects the co-sale
    rights or obligations of holders of
    series N-2
    preferred shares;
    any amendment to the by-laws that adversely affects the forced
    sale rights or obligations of holders of
    series N-2
    preferred shares; and
    any amendment to the section of the by-laws of Maxcom relating
    to the voting rights of
    series N-2
    preferred shares.  power-of-attorney.
   81




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##### Table of Contents



series N-1 series N-2 series N-1
        
    such shareholders have not voted in favor of a resolution
    approved at the relevant shareholders meeting pursuant to
    which it was resolved not to take any action against the
    directors who are to be sued; and
    the claim in question covers the total amount of damages alleged
    to have been caused to Maxcom as well as to the individual
    plaintiffs interests.        Approval
    of key matters
   82




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##### Table of Contents




    the incurrence or assumption by the company
    and/or any
    of its subsidiaries of any indebtedness (including capitalized
    lease obligations) or other liabilities exceeding
    U.S.$10,000,000;
    the issuance of any equity securities of the company or any of
    its subsidiaries;
    the sale, transfer, exchange or other disposal of all or a
    significant portion of the assets or equity securities of the
    company or any of its subsidiaries;
    any assignment by the company or any of its subsidiaries for the
    benefit of creditors or the voluntary commencement of any
    bankruptcy or insolvency proceedings;
    the establishment by the company or any of its subsidiaries of
    any non-wholly-owned-subsidiary or the making by the company or
    any of its subsidiaries of any loans or advances to, guarantees
    for the benefit of, or investments in, any person or entity
    other than a wholly-owned subsidiary;
    the declaration of dividends on, or the making of any other
    distributions in respect of, any of its capital stock, other
    than dividends and distributions by a direct or indirect
    wholly-owned subsidiary of the company to its parent;
    the acquisition of any equity securities of the company or any
    of its subsidiaries;
    the entering into any transaction with any restricted persons;
    the election, appointment or removal of the Chief Executive
    Officer, the General Managers of any business units, the Chief
    Operating Officer, the Chief Financial Officer, the Director of
    Marketing and the Chief Engineer (or any other individual with a
    similar or more senior title or position), and the approval of
    salary, compensation and benefit or other similar plans for such
    key executives;
    the approval of the companys and its subsidiaries
    annual business plan and annual budget for each fiscal year;
    the entering by the company or any of its subsidiaries into any
    new line of business (other than the main corporate purpose of
    the company);
    any agreement that would restrict the companys or any of
    its subsidiaries right or ability to perform the
    provisions of its by-laws (Estatutos) or any agreements or
    instruments to which it is a party;
    the manner in which the shares or other interests of any
    subsidiary or entity owned by the company shall be voted at
    shareholders meetings called for key matters;
    any amendments to the concessions/licenses granted by the
    Mexican authorities, by-laws and certain other specified
    agreements;
    the subdivision or combination, in any manner, of the
    outstanding shares of one class or series of shares, unless the
    outstanding shares of the other class or series of shares of the
    company shall also be proportionately subdivided or combined in
    a similar manner;
    the grant to any person or entity of the right to request the
    company to register securities; and
    any commitment or agreement to do any of the foregoing.  Board of
    Directors
  series A-1 series B-1
 83




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##### Table of Contents



series N-2 series N-2 series A-1 series N-2 series N-2
  
    the
    series N-2
    preferred shares, or such other voting preferred stock
    represents at least 3% of the issued and outstanding capital
    stock of Maxcom; or
    there are any shares of
    series N-2
    preferred shares outstanding and at least U.S.$17.5 million
    principal amount of the old notes outstanding.  series N-2 series N-2 series N-2 series N-2
  Dividends
  series A-1
  series N-2 series A-1, series N-2 series N-2
    Liquidation
    rights
    series N-2
 84




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##### Table of Contents



series A-1,
  
    U.S.$0.4927 per share, as adjusted for stock splits, stock
    dividends and similar events, plus the accretion of such amount
    at a cumulative rate of 12% per year compounded
    semi-annually; and
    the amount that holders of
    series N-2
    preferred shares would have received if they had converted all
    of their
    series N-2
    preferred shares into series N shares (or, to the extent
    the series N shares has been converted, to the class of
    stock the series N shares is converted into) immediately
    prior to the liquidation event.  series N-2 series N-2
  series N-2 series A-1,
    Changes
    in share capital
    series N-1 series N-1
    Preemptive
    rights
      
    in connection with mergers or spin-offs;
    on the conversion of convertible debentures; or
    issuances of shares pursuant to a public offering, if a general
    extraordinary shareholders meeting called for such purpose
    so approves and other requirements specified in Article 81
    of the Mexican Securities Law are satisfied, including obtaining
    the approval of the Mexican National Banking and Securities
    Commission.    series N-2
 85




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##### Table of Contents



series N-2 series N-2
  series N-1 series N-1
  Optional
    conversion rights
  series N-2
  
    the consummation of a public offering; and
    the elimination of certain foreign ownership restrictions under
    Mexican law so as to permit the unrestricted ownership
    and/or
    control of Maxcom by non-Mexicans.  series N-2
  series A-1, series N-2
  Mandatory
    conversion
  series N-2
  series A-1, series N-2
  and/or series N-2 series N-2
  Anti-dilution
    protection and conversion price adjustments
   86




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##### Table of Contents




    any rights, options and warrants granted or issued, or
    authorized to be granted or issued, to certain employees,
    directors, consultants and vendors of Maxcom and its
    subsidiaries, as of March 5, 2002, or under any management
    incentive plan approved by the board of directors, including the
    affirmative vote of at least one of the directors selected from
    Nexus appointees.
    any securities issued pursuant to the private equity investment
    and up to U.S.$3.8 million of securities issued within one
    year of the consummation of the private equity investment at or
    above U.S.$0.4927 per share;
    any shares issued upon the exercise or conversion of any of the
    foregoing; and
    any of the capital stock issued in connection with a conversion
    of any of the
    series A-1,
    B-1, N-1 or N-2 preferred shares.      
    an amount equal to (A) the sum of (i) the product
    derived by multiplying the conversion price in effect
    immediately prior to such issuance or sale by the number of
    common shares deemed outstanding, as defined below,
    immediately prior to such issue or sale, plus (ii) the
    aggregate consideration (expressed as a net price per share), if
    any received by Maxcom upon such issue or sale, divided by
    (B) the number of common shares deemed outstanding
    immediately after such issue or sale; and
    the conversion price determined by multiplying the conversion
    price in effect immediately prior to such issuance or sale by a
    fraction, the numerator of which will be the sum of (i) the
    number of the common shares deemed outstanding immediately prior
    to such issue or sale multiplied by the then market value of the
    then fair market value of the common stock of Maxcom then
    outstanding as of the date of such issuance or sale plus
    (ii) the aggregate consideration, if any, received by
    Maxcom upon such issuance or sale and the denominator of which
    shall be the product derived by multiplying the then fair market
    value of the common stock of Maxcom by the number of common
    shares deemed outstanding immediately after such issue or sale.       87




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series N-2 series N-2 series N-2
  Right of
    first refusal
  series N-2 series N-2
  
    a sale or transfer of at least 50.1% of the total capital stock
    of Maxcom or the sale of all or substantially all of the
    consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties, or
    the elimination of certain foreign ownership restrictions under
    Mexican law so as to permit the unrestricted ownership
    and/or
    control of Maxcom by non-Mexicans.  Right of
    first offer
  series A-1, series A-1,
  
    a qualified public offering;
    the sale or transfer of any
    series A-1,
    B-1 or N-1 preferred shares involving at least 50.1% of the
    total capital stock of Maxcom or a sale of all or substantially
    all of the consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties.  Co-sale
    rights and forced sale obligations
  Co-sale
    rights
  series A-1, series N-2 series N-2
  
    a qualified public offering; or
    the sale or transfer of any
    series A-1,
    B-1 or N-1 preferred shares involving a transfer of at least
    50.1% of the total capital stock of Maxcom or a sale of all or
    substantially all of the consolidated assets of Maxcom to an
    independent third party or parties in one or more related
    transactions.  series N-2
 88




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##### Table of Contents




    a qualified public offering; or
    the sale or transfer of any
    series A-1,
    B-1 or N-1 preferred shares involving a transfer of at least
    50.1% of the total capital stock of Maxcom or a sale of all or
    substantially all of the consolidated assets of Maxcom to an
    independent third party or parties in one or more related
    transactions.  Forced
    sale obligations
  series N-2 series N-2
  series N-2
  series N-2
  
    the consideration for such sale is paid in cash
    and/or
    freely tradable, exchangelisted equity securities; and
    the value of such consideration on a per share basis is not less
    than the then applicable liquidation preference for each share
    of series N-2 preferred shares.    
    a qualified public offering; or
    the sale or transfer of any
    series A-1,
    B-1 or N-1 preferred shares involving a transfer of at least
    50.1% of the total capital stock of Maxcom or a sale of all or
    substantially all of the consolidated assets of Maxcom to an
    independent third party or parties in one or more related
    transactions.  Other
    provisions
  series N-2
    series N-2 series N-2
 89




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##### Table of Contents



Rights
    and obligations with respect to public offerings
  Registration
    rights
    series N-1 series A-1
  Cooperation
    in connection with an underwritten offering
  series N-2 series N-2
  Listing
    rights
  series N-2 series N-2 series N-2
  Lock-up
    restrictions
  series N-2 series N-2
  Transfer
    of CPOs and transfer restrictions
  series N-2 series N-2
 90




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##### Table of Contents



series A-1,
  series A-1, series A-1,
  series A-1, series A-1,
        
    transfers related to series N shares and N-1 and
    N-2 shares and any successor stock; and
    subscriptions made pursuant to the exercise of a
    shareholders preemptive rights, as long as the percentage
    participation of the shareholders in our capital stock does not
    vary.  Other
    provisions
  Ownership
    restrictions
    Forfeiture
    of stock
    Dissolution
    
    the impossibility of continuing with our current line of
    business;
    the resolution of our shareholders at an extraordinary general
    shareholders meeting; 91




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##### Table of Contents




    the reduction of the number of our shareholders to fewer than
    two; and
    the loss of two thirds of our capital stock.  Shareholder
    conflicts of interest
    Director
    conflicts of interest
    Description
    of the CPO trust
  General
  series N-2 series N-2 series N-2
  Certificados de Participación
    Ordinarios series N-2 series N-2
  series N-2
    Purpose
    Waiver
    of statutory preemptive rights
   92




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##### Table of Contents



Voting
    and economic rights
  series N-2
      Administration
    of the CPO trust
    Common
    representative
    Transfer
    Term
    and termination
    Fees
   93




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##### Table of Contents



C.
    Material
    contracts  Concessions
  point-to-point point-to-multipoint
  Interconnection
    agreements
    Lucent
    supply agreement
    Metro Net
    capacity sales agreement
    Bestel
    capacity acquisition agreement
      Axtel
    sale of capacity agreement
    CPO trust
    agreement
  series N-2 share
 94




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##### Table of Contents



Securityholders
    agreement
    Spin-off
    and sale of subsidiary
      Indentures
  2000
    Indenture
  3 4 3 4
  Old
    Indenture
    New
    Indenture
   95




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##### Table of Contents



Warrant
    agreement
  3 4 3 4
  Lease
    termination agreement
  15-year
    Credit
    facilities
  Banco
    Santander
  (Tasa de Interés
    Interbancaria de Equilibrio)
  Tasa de Interés Interbancaria
    de Equilibrio
  IXE
    Banco
  (Tasa de
    Interés Interbancaria de Equilibrio)
 96




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##### Table of Contents



Tasa de Interés Interbancaria
    de Equilibrio
  Certificados
    Bursatiles
  Tasa de Interés Interbancaria de
    Equilibrio
  Banorte
  Tasa de Interés Interbancaria de Equilibrio
  Collection
    Trust
    Hedging
    agreement
      D.
    Exchange
    controls     97




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##### Table of Contents



E.
    Taxation  United
    States Federal Income Tax Considerations
  General
  3 4 3 4 and/or
  
    An individual citizen or resident of the United States;
    a corporation or other entity taxable as a corporation created
    in or organized under the laws of the United States or of
    any political subdivision thereof;
    an estate, the income of which is subject to U.S. federal
    income tax without regard to its source; or
    a trust, if a court within the United States is able to exercise
    primary supervision over its administration and one or more
    United States persons have the authority to control all of the
    substantial decisions of such trust, or if the trust has a valid
    election in effect under applicable Treasury Regulations to be
    treated as a U.S. person.  Non-U.S. holder
    
    a foreign person or entity; 98




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##### Table of Contents




    a tax-exempt organization, a financial institution, an insurance
    company, a regulated investment company or a dealer or broker in
    securities or currencies;
    a trader in securities or commodities that elects
    mark-to-market
    treatment;
    a person who holds the Notes, and with respect to a holder of
    new notes, the CPOs, as part of an integrated investment such as
    a straddle, hedge, constructive sale, conversion transaction or
    other risk reduction transaction;
    a person whose functional currency is not the U.S. dollar;
    a partnership or other flow-through entity (including an
    S corporation or a limited liability company treated as a
    partnership for U.S. federal income tax purposes);
    a person subject to the alternative minimum tax; or
    a person who owns or will own directly, indirectly or by
    attribution 10% or more (by voting power) of our voting stock or
    10% or more (by value) of our outstanding capital stock.  non-U.S. government
  Form 20-F
    U.S. federal
    income tax consequences to U.S. Holders of the
    Notes
  Payments of interest and additional
    amounts.
  Original issue discount.
   99




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##### Table of Contents



The new notes.
        The old notes.
  3 4 3 4 3 4
  3 4 3 4
  3 4
 100




---



##### Table of Contents



The
    133/4% notes. 3 4 3 4 3 4 3 4
  3 4 3 4
  Inclusion of original issue discount in
    income.
  
    the product of the Notes adjusted issue price
    at the beginning of such accrual period and its yield to
    maturity (determined on the basis of compounding at the
    close of each accrual period and properly adjusted for the
    length of the accrual period) over
    the amount of qualified stated interest payments, if any,
    allocable to such accrual period.         101




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##### Table of Contents



3 4 3 4
  3 4
  Premium
    and acquisition premium.
  The new notes.
    The old notes.
    The
    133/4% notes. 3 4 3 4 3 4
  General.
  Market discount.
 102




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##### Table of Contents



General.
  instrument-by-instrument
  The new notes.
  Series N-1 Series N-1 and/or
  The old notes.
   103




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##### Table of Contents



3 4 3 4 3 4 3 4
  Sale, exchange or retirement of a Note.
    General.
    Adjusted tax basis of the new notes. provided that provided that
    Adjusted tax basis of the old notes.
  3 4 3 4 3 4
  Adjusted tax basis of the old notes and the
    CPOs. 3 4 3 4 3 4 3 4
 104




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##### Table of Contents



3 4
  3 4 3 4
  3 4
  Adjusted tax basis of the
    133/4% notes. 3 4 3 4
  Foreign tax credit. Interest, original issue discount and
    additional amounts.
  Effect of Mexican withholding
    taxes.
    non-U.S. taxes,
  Certain
    U.S. federal income tax consequences of holding and
    disposing of the CPOs
  Distributions. series N-2
 105




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##### Table of Contents



Sale, redemption or other taxable disposition of the
    CPOs.
      Passive foreign investment company
    considerations.
 106




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##### Table of Contents



mark-to-market
  Controlled foreign corporation
    considerations.
    Certain
    U.S. federal income tax consequences to
    non-U.S. holders
    of the Notes and CPOs
  non-U.S. holder non-U.S. holder
  non-U.S. holder
 107




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##### Table of Contents



non-U.S. holder non-U.S. holder
  Information
    reporting and backup withholding
    Form W-9 Form W-9.
    non-U.S. holder
  Mexican
    taxation
  Ley del Impuesto
    sobre la Renta
     108




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##### Table of Contents



United
    States/Mexico and other tax treaties
    Mexican
    tax consequences to Foreign Holders of the exchange of old notes
    for new notes
  General.
  Other taxes.
  Mexican
    tax consequences to Foreign Holders of the notes
  Taxation of interest and principal.
  
    the notes are offered through banks or brokerage houses in a
    country with which Mexico has a tax treaty in force;
    the notes are registered in the Special Section of the National
    Registry of Securities (Registro Nacional de
    Valores); and
    certain periodic information requirements by the Mexican
    Ministry of Finance (Secretaría de Hacienda y
    Crédito Público) are complied with.
    If these conditions are not met, the applicable withholding tax
    rate will be 10%.  FOREIGN HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING
    WHETHER THEY RESIDE IN A COUNTRY THAT HAS ENTERED INTO SUCH A
    TREATY WITH MEXICO WHICH IS EFFECTIVE, AND IF SO, THE CONDITIONS
    AND REQUIREMENTS FOR OBTAINING BENEFITS UNDER SUCH TREATY.
    
    a shareholder of the issuer who owns, directly or indirectly,
    individually or jointly with related parties, more than 10% of
    the voting stock of the issuer, or
    a legal entity 20% or more of whose stock is owned, directly or
    indirectly, individually or jointly with related parties, by the
    issuer,    Secretaría de
    Hacienda y Crédito Público
 109




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##### Table of Contents




    the notes are registered with the Special Section of the
    National Registry of Securities and Intermediaries and copies of
    approval of such registration are provided to the Ministry of
    Finance;
    we timely file with the Ministry of Finance certain information
    relating to the issuance of the new notes;
    we timely file with the Ministry of Finance on a quarterly basis
    information on the amount and dates of interest payments made
    during each quarter and information representing that no party
    related to us, directly or indirectly, is the effective
    beneficiary of more than five percent (5%) of the aggregate
    amount of each such interest payment; and
    we maintain records that evidence compliance with the conditions
    set forth above.        
    the effective beneficiary of the interest;
    duly incorporated under the laws of its country of origin;
    exempt in its country of origin from income tax on interest
    income; and
    registered with the Ministry of Finance for that purpose.    Taxation of additional amounts.
    Taxation of accrued interest.
  Gain on dispositions.
 110




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##### Table of Contents



Mexican
    tax consequences to Foreign Holders of the CPOs
  Secretaría de Hacienda y Crédito
    Público
  Certain
    tax consequences to Mexican holders on the exchange or
    disposition of the CPOs.
    F.
    Dividends
    and paying agents    G.
    Statement
    by experts    H.
    Documents
    on display  1-800-SEC-0330
  I.
    Subsidiary
    information   PART II  ITEM 11.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest
    rate risk
  3 4
 111




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##### Table of Contents



Foreign
    exchange risk
        ITEM 12.
    DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES   PART III  ITEM 13.
    DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES    ITEM 14.
    MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS    
    all of the covenants restricting the incurrence of indebtedness,
    the making of investments, the granting of loans, the payment of
    dividends, the creation of liens, the entering into transactions
    with affiliates, the undertaking of mergers, consolidation of
    sales, the disposition of assets or subsidiary stock, a change
    in control and any limitations on the transfer of funds from
    subsidiaries to Maxcom;
    the redemption option in the event of a change of
    control; and
    events of default related to the non-compliance with such
    covenants, cross-defaults, adverse judgments in excess of
    U.S.$5.0 million and certain bankruptcy events.   112




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##### Table of Contents



ITEM 15.
    CONTROLS
    AND PROCEDURES  Form 20-F Rules 13a-14(c) 15d-14(c)
   ITEM 16.  A.
    AUDIT
    COMMITTEE FINANCIAL EXPERT  A-1 Director
  B.
    CODE OF
    ETHICS      C.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Year Ended December 312005


2004(In millions)Audit Fees(1)

Ps.
2.7


Ps.
2.6Taxes Fees and Other Statutory
    Audit requirements fees(2)


0.7



0.7Total revenues

Ps.
3.4


Ps.
3.3     (1)
    
    Audit Fees includes fees associated with the annual audit of our
    consolidated financial statements. Audit fees also include fees
    associated with Securities and Exchange Commission statutory
    quarterly and annual reporting audit requirements. 113




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##### Table of Contents



(2)
    
    Taxes Fees and Other Statutory Audit requirements fees includes
    fees associated with Mexican statutory audit requirements for
    tax and other purposes. Taxes Fees and Other Statutory Audit
    requirements fees also includes fees incurred for assistance
    with tax planning and compliance matters.    D.
    EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.  Not Applicable
  E.
    PURCHASE
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS.  240.10b-18(a)(3),
 PART IV  ITEM 17.
    FINANCIAL
    STATEMENTS   114




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##### Table of Contents



ITEM
    18.
    FINANCIAL
    STATEMENTS.  PageMaxcom Telecomunicaciones, S.A.
    de C.V. and SubsidiariesReport of
    Independent Registered Public Accounting Firm


2Consolidated
    Balance Sheets as of December 31, 2005 and 2004


F-3Consolidated
    Statements of Operations for the years ended December 31,
    2005, 2004 and 2003


F-4Consolidated
    Statements of Changes in Shareholders Equity for the years
    ended December 31, 2005 and 2004


F-5Consolidated
    Statements of Changes in Financial Position for the years ended
    December 31, 2005, 2004 and 2003


F-6Notes to the
    Consolidated Financial Statements for the years ended
    December 31, 2005, 2004 and 2003


F-7  115




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##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
                F-1




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETSAS OF DECEMBER 31, 2005 AND 2004(Notes 1,
    3 and 4)Thousands of Mexican Pesos (Ps.) in purchasing
    power
    as of December 31, 2005, and in thousands of
    US Dollars ($) 2004


2005


2005(Unaudited)(Note 3)ASSETSCurrent assets:Cash and Temporary Investments

Ps.
62,189


Ps.
223,423


$
20,859Restricted cash


5,740







67,929



223,423



20,859Accounts receivable:Clients, net of estimate for
    doubtful accounts of Ps.86,237 and Ps.65,200 in 2005 and 2004,
    respectively


120,718



172,139



16,071Value-added tax refundable


2,684



22,754



2,124Other accounts receivable


30,523



21,515



2,009153,925



216,408



20,204Inventory, net of reserves for slow
    moving supply of Ps. 312 and Ps. 353 in 2005 and 2004,
    respectively


11,688



15,403



1,438Prepaid expenses  Net


65,996



76,784



7,169Total current assets


299,538



532,018



49,670Restricted long term cash
    (Note 9)


13,105



7,672



716Frequency rights  Net
    (Note 5)


97,419



86,102



8,039Preoperating expenses 
    Net


158,607



122,305



11,419Intangible assets  Net
    (Note 8)


378,330



303,527



28,338Telephone network systems and
    equipment  Net (Note 7)


1,783,834



2,082,795



194,456Other assets:Labor obligations upon retirement
    (Note 12)






14,798



1,382Guaranty deposits


16,684



4,597



429Other assets


4,928



5,904



551Total assets

Ps.
2,752,445


Ps.
3,159,718


$
295,000LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Short-term bank loans portion
    (Note 9)

Ps.
150,443


Ps.
66,648


$
6,222Suppliers and other accounts payable


222,757



251,463



23,477Clients deposits


2,677



3,999



373Commercial paper (Note 10)






151,500



14,144Other taxes payable


28,839



18,707



1,747Total current liabilities


404,716



492,317



45,963Long-term liabilities:Notes payable  Net
    (Note 11)


622,012



576,908



53,862Bank loans (Note 9)


28,711



79,072



7,382Notes payable


31,652



140,454



13,113Other accounts payable


28,194



25,620



2,392Deferred income tax (Note 15)






25,971



2,425Labor obligations upon retirement
    (Note 12)






16,693



1,559Derivative financial instruments
    (Notes 4q. and 19)






18,837



1,759Total long-term liabilities


710,569



883,555



82,492Total liabilities


1,115,285



1,375,872



128,455Shareholders equity
    (Notes 13 and 18):Capital stock


2,500,957



2,744,607



256,244Additional paid-in capital


895,494



219,622



20,505Net loss for the year


(1,759,291
)


(1,180,383
)


(110,204
)Total shareholders equity


1,637,160



1,783,846



166,545Commitments and contingencies
    (Note 16)Total liabilities and
    shareholders equity

Ps.
2,752,445


Ps.
3,159,718


$
295,000    F-2




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
 CONSOLIDATED
    INCOME STATEMENTS
    FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
    Thousands of Mexican Pesos (Ps.) in purchasing
    power
    as of December 31, 2005, and in thousands of
    US Dollars ($) 2003


2004


2005


2005(Unaudited)(Note 3)Net revenues (Note 17)

Ps.
832,212


Ps.
897,149


Ps.
1,150,472


$
107,410Operating costs and expensesNetwork operating costs


298,986



316,606



383,765



35,829Selling, general and
    administrative expenses


419,018



386,871



468,270



43,719Depreciation and amortization


365,411



346,045



281,636



26,294Total operating costs and expenses


(1,083,415
)


(1,049,522
)


(1,133,671
)


(105,842
)Operating profit (loss)


(251,203
)


(152,373
)


16,801



1,568Integral cost (income) of
    financing:Interest expense  Net


28,310



38,733



97,123



9,068Exchange gain (loss) 
    Net


188,186



1,451



(19,973
)


(1,867
)Gain on monetary position


(82,781
)


(89,041
)


(22,090
)


(2,062
)133,715



(48,857
)


55,060



5,139Other income (expense) 
    Net


(164
)


(818
)


8,991



839Loss before special entry


(385,082
)


(104,334
)


(29,268
)


(2,732
)Special item (Note 2)










(15,365



(1,435
)Loss before provisions for taxes


(385,082
)


(104,334
)


(44,633
)


(4,167
)Tax provisions for: (Note 15)Asset tax


13,375



27,835







Deferred income tax


563



651



25,971



2,484Current income tax










635



Employees profit-sharing


95



483







14,033



28,969



26,606



2,484Net loss for the year

Ps.
(399,115
)

Ps.
(133,303
)

Ps.
(71,239
)

$
(6,651
)    F-3




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
 STATEMENTS
    OF CHANGES IN SHAREHOLDERS EQUITYFOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
    Thousands of Mexican Pesos (Ps.) in purchasing
    power
    as of December 31, 2005, and in thousands of
    US Dollars ($) Additional





TotalCapital


Paid-in


Accumulated


ShareholdersStock


Capital


Deficit


EquityBalances at December the 31,
    2003

Ps.
1,905,012


Ps.
1,595


Ps.
(1,625,988
)

Ps.
280,619Increase in capital stock arising
    from debt restructuring (Note 13)


595,945



893,899







1,489,844Net integral loss for the year










(133,303
)


(133,303
)Balances at December 31, 2004


2,500,957



895,494



(1,759,291
)


1,637,160Spin-off effect (Notes 2 and
    13)


(650,249
)






650,147



(102
)Capitalization of premium on
    shares subscription


893,899



(893,899
)






Capitalization of liabilities
    (Note 13)






218,027







218,027Net loss for the year










(71,239
)


(71,239
)Balances at December 31, 2005

Ps.
2,744,607


Ps.
219,622


Ps.
(1,180,383
)

Ps.
1,783,846U.S. Dollars (Unaudited)
    (Note 3)

$
256,244


$
20,505


$
(110,204
)

$
166,545    F-4




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND
    SUBSIDIARIES
 STATEMENTS
    OF CHANGES IN THE CONSOLIDATED FINANCIAL POSITIONFOR THE YEARS ENDED ON DECEMBER 31, 2005, 2004 AND
    2003
    Thousands of Mexican Pesos (Ps.) of purchasing
    power

as of
    December the
    31st of
    2005, and in thousands of US Dollars
    ($) 2003


2004


2005


2005(Unaudited)(Note 3)Operating activities:Net loss

Ps.
(399,115
)

Ps.
(133,303
)

Ps.
(71,239
)

$
(6,651
)Charges to income not affecting
    resources:Depreciation and amortization


365,411



346,045



281,636



26,296Labor obligations upon retirement










1,895



177Deferred income tax










25,971



2,425(Increase) decrease in:Accounts receivable  Net


(9,051
)


(16,498
)


(62,483
)


(5,834
)Inventory  Net


1,576



8,368



(3,715
)


(347
)Prepaid expenses  Net


(15,716
)


(10,030
)


(10,788
)


(1,007
)Restricted cash, liabilities and
    others  Net


5,683



82,133



137,297



12,818Resources arising from (used in)
    the following operating activities


(51,212
)


276,715



298,574



27,877Financing activities:Increase in capital stock






595,945







Contributions for future capital
    increases


1,122



893,898







Spin-off effect










(102
)


(10
)Capitalization of liabilities










218,027



20,356Derivative financial instruments










18,837



1,759Benefits of loans and bond payable


100,930



(1,390,376
)


72,962



6,812Resources derived from financing
    activities


102,052



99,467



309,724



28,917Investment activities:Investment in telephone network
    systems and equipment, net of dispositions


(118,784
)


(335,008
)


(440,526
)


(41,130
)Intangible assets


(17,184
)


(33,348
)


(17,649
)


(1,648
)Other assets


(299
)


8,997



11,111



1,037Resources used in investment
    activities


(136,267
)


(359,359
)


(447,064
)


(41,741
)Cash and cash equivalents:Increase (decrease) in cash and
    temporary investments


(85,427
)


16,823



161,234



15,053Cash and cash equivalents at
    beginning of year


130,793



45,366



62,189



5,806Cash and cash equivalents at end
    of year

Ps.
45,366


Ps.
62,189


Ps.
223,423


$
20,859    F-5




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003(Figures
    in thousands of Mexican Pesos (Ps.) of purchasing
    power as
    of December 31, 2005, and in thousands of U.S. Dollars
    ($),
    except for exchange rates, stock values, options and
    warrants)
  NOTE 1 
    INCORPORATION AND
    BUSINESS:
  th
    Secretaría de Comunicaciones y
    Transportes SCT
  point-to-point point-to-multi-point point-to-point point-to-multipoint
               F-6




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 2 
    SPIN-OFF AND SALE OF
    SUBSIDIARY:
      NOTE 3 
    BASIS OF
    PRESENTATION:
  Consolidation
    Subsidiary Company

Interest %

Line of BusinessCorporativo en Telecomunicaciones,
    S. A. de C. V.


100%


Technical personnel servicesMaxcom Servicios Administrativos,
    S. A. de C. V.


100%


Administrative personnel servicesMaxcom SF, S. A. de C. V.


100%


Rendering of financial servicesOutsourcing Operadora de Personal,
    S. A. de C. V.


100%


Operating personnel servicesMaxcom T. V., S. A. de C. V.(1)


100%


Cable television servicesMaxcom USA, Inc.(1)


100%


International telecommunication
    Services     (1)
    
    Maxcom T.V. and Maxcom USA are still in the preoperating stage.    Convenience translation
  Diario Oficial de la Federación
  NOTE 4 
    SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES:
     F-7




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Recognition of the effects of inflation
              Cash and temporary investments
    Inventories
    Telephone network systems and equipment
       F-8




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
              Concessions
  30-year
    Frequency rights
    Preoperating expenses
      Intangibles
     F-9




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Long-lived assets
  non-amortizable
  Liabilities and provisions
    Transactions in foreign currencies
    Income tax (ISR)
    asset-and-liability
  Labor obligations upon retirement
        Financial instruments
   F-10




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Stock-option compensations
    A-8
  inter alia
        2003


2004


2005Expected yield










Expected stock price volatility


50.00
%


52.03
%


55.00
%Risk-free interest rate


2.74
%


2.76
%


4.35
%Expected life of options


10



10



10   Derivative financial instruments
    Revenue recognition
   F-11




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    and/or
              Information by segments
    New accounting standards
   F-12




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
                FIN A-1
  A-2
  A-3
  A-4
  A-5
  A-6
  A-7
  A-8
      NOTE 5
     FREQUENCY
    RIGHTS:
    2004


2005Frequency rights

Ps.
144,507


Ps.
144,507Less  Accumulated
    amortization


(47,088
)


(58,405
)Ps.
97,419


Ps.
86,102    F-13




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 6
     RELATED
    PARTIES:
    2003


2004


2005Commissions and administrative
    services paid to:Comercializadora Road el Camino,
    S. A, de C. V.(1)

Ps.
48


Ps.
39


Ps.
1,427Expenses associated to Bank of
    America, Co.(2)


212



414



488Advertising services provided by
    Difusión Panorámica, S. A. de C. V.(3)






91



34Offices and site lease(4)


262



273



Commissions paid to Francisco
    Adrián Aguirre Palme(5)






60



Travel expenses in relation to
    Bachow and Associates, Inc.(6)


277



32



Advertising and other
    administrative services rendered by Operadora Plusgamma, S. A.
    de C. V.(7)


311







Travel expenses in relation to CT
    GlobalTelecommunications, Inc. and other
    expenses(8)


(66
)






     (1)
    
    The activity of 2005 and 2004 correspond to sales
    commissions of telephone lines. The transactions carried out
    during 2003 correspond to administrative services.(2)
    
    Correspond to expenses relating to the debt restructuring and
    travel expenses.(3)
    
    Advertising services paid to Difusión Panorámica, S.A.
    de C.V.(4)
    
    The Company leased a site located within the premises of a
    building that, until 2004, was controlled by the family of one
    of the shareholders.(5)
    
    During 2004, the Company incurred expenses of sales
    commissions of telephone lines.(6)
    
    Travel expenses of certain shareholders.(7)
    
    Corresponds to an investment in an advertising agreement of
    $3,000, executed on April of 2003 with Operadora Plusgamma, S.A.
    de C.V., which shall render such advertising services through
    Grupo Radio Centro.(8)
    
    Credit note on travel expenses relating to the attendance of
    meetings by the Board of Directors. F-14




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 7
     TELEPHONE NETWORK SYSTEMS AND EQUIPMENT 
    NET:
    Useful Life (Years)2004


2005


2004


2005Telecommunication network and
    equipment

Ps.
1,301,945


Ps.
1,462,591



10



17Leasehold improvements


315,458



452,068



20



30Radio equipment


282,270



269,776



10



30Line installation cost


239,576



266,963



20



30Electronic equipment


230,677



223,304



3.33



25Capitalized expenses due to
    construction of networks


162,464



209,714



20



30Computer equipment


60,709



78,903



3.33



5Transportation equipment


26,589



29,979



4



4Office furniture


17,178



17,968



10



10Other


17,286



17,487



10



10Engineering equipment


11,379



11,943



10



10Subtotal


2,665,531



3,040,696Depreciation and accumulated
    amortization


(1,113,245
)


(1,243,049
)Subtotal


1,552,286



1,797,647Construction in progress


231,548



285,148Ps.
1,783,834


Ps.
2,082,795           2004


2005Computer equipment

Ps.



Ps.
15,953Transportation equipment


3,286



10,949Telecommunication equipment






8,950Total

Ps.
3,286


Ps.
35,852  F-15




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 8
     INTANGIBLE ASSETS:
    Term ofAmortization (Years)2004


2005


2004


2005Infrastructure rights

Ps.
275,085


Ps.
279,204



30 & 15



35 & 17Debt issuance costs


264,619



265,433



7



7Software licenses


137,812



149,985



3.3



3.3677,516



694,622Accumulated amortization


(299,186
)


(391,095
)Ps.
378,330


Ps.
303,527     NOTE 9
     LONG-TERM BANK LOANS:
    2004


2005Short-term portion:IXE Banco, S. A.(1)

Ps.



Ps.
47,573Banco Mercantil del Norte, S. A.(2)






19,075Banco Santander Serfin, S. A.(3),
    (4) and (5)


150,443



Ps.
150,443


Ps.
66,648Long-term portion:IXE Banco, S. A.(1)

Ps.



Ps.
25,026Banco Mercantil del Norte, S. A.(2)






54,046Banco Santander Serfin, S.
    A.(3), (4) and (5)


28,711



Ps.
28,711


Ps.
79,072     (1)
    
    The Company has two unsecured credits with IXE Banco, S.A.. One
    was taken out in April of 2005 for a term of 24 months; the
    second was taken out in October of 2005 for a term of
    19 months. For both credits the monthly interest rate is
    estimated based on the equilibrium interbank interest rate
    (EIIR) plus 3.0 percentage points and will be paid-off by
    equal monthly amortizations of principal and interest on unpaid
    balances.(2)
    
    Unsecured line of credit taken out with Banco Mercantil del
    Norte, S.A., in October of 2005. This line of credit bears
    monthly interest at an EIIR rate plus 3.0 percentage
    points. The line of credit was taken out for a term of
    48 months.   F-16




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  (3)
    
    Unsecured line of credit with Banco Santander Serfin, S.A., that
    generated monthly interest at an EIIR rate plus
    1.0 percentage point. The agreement was executed on
    August 17, 2004, and was renewed several times, until the
    Company paid it off on October 26, 2005.(4)
    
    Unsecured credit with Banco Santander Serfin, S.A., taken out at
    a monthly interest rate of EIIR plus 1.2 percentage points.
    The credit was taken out in October of 2004, for a term of
    18 months, with equal monthly amortizations of principal
    and interest on unpaid balances. The credit was paid off in
    advance in November of 2005.(5)
    
    Unsecured line of credit with Banco Santander Serfin, S.A., with
    monthly interest at a LIBOR rate plus 1.9 percentage
    points. The agreement was executed on April 28, 2004, and
    was renewed several times until the Company paid it off on
    October 26, 2005.    NOTE 10
     SHORT-TERM FINANCING WITH COMMERCIAL
    PAPER:
    NOTE 11
     LONG-TERM PAYABLE
    BONDS:
    2004


2005$5,118: Old Bonds
    (issued in the year 2002 due to restructuring debt) with
    maturity in 2007, bearing interest at 0% until March of 2006,
    and as of the last year, bearing interest at a rate of 10%

Ps.
59,573


Ps.
54,818$36,118: New Bonds
    (issued in the year 2004 due to restructuring debt) bearing a
    variable interest rate of 4% to 11.25% until October of 2009


420,420



386,853$11,590: B
    Series Bonds (issued on March the
    17th of
    2000) bearing interest at a rate of 13.75%, with maturity
    date on April the
    1st of
    2007


134,910



124,139Accrued interest


8,793



12,103Less: Discount (net of accumulated
    amortization)


(1,684
)


(1,005
)Ps.
622,012


Ps.
576,908        F-17




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      pari passu
      NOTE 12
     LABOR OBLIGATIONS UPON
    RETIREMENT:
   F-18




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    a. Seniority premium:Obligations due to current benefits

Ps.
602Less: assets of the planCurrent net liabilities


602Less: projected net liabilities


(1,219
)Additional liabilities

Ps.
Obligation for projected benefits

Ps.
709Plus (less): Entries pending of
    amortization in 22 and 24 years:Net transition assets


510Projected net liabilities

Ps.
1,219Net cost for the period:Labor cost

Ps.
217Financial cost


21Transition assets amortization


(22
)Total net cost for the period(*)

Ps.
216b. Termination of
    employment:Obligations due to current benefits

Ps.
15,474Less: assets of the planCurrent net liabilities


15,474Less: projected net liabilities


(676
)Additional liabilities

Ps.
14,798Obligation for projected benefits

Ps.
20,443Plus (less): Entries pending of
    amortization in 22 and 24 years:Net transition liabilities


(19,767
)Projected net liabilities

Ps.
676Net cost for the period:Labor cost

Ps.
2,516Financial cost


758Transition assets amortization


964Total net cost for the period(*)

Ps.
4,238     (*)
    
    The net cost for the period amounted to Ps.4,454, determined in
    the same manner as obligations due to projected benefits, on an
    actual estimated rate of return of 4% and an average salary
    increase of 1.5%. F-19




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Obligations due to current
    benefits upon termination of employment

Ps.
15,474Projected net liabilities for
    seniority premium


1,219Total accrued liabilities for
    labor obligations

Ps.
16,693   NOTE 13
     SHAREHOLDERS
    EQUITY:
    Dirección
    General de Inversión Extranjera
    Series and Class of Shares

2003


2004


2005Issued and outstanding:A
    Series  Class I (fixed portion)


765,714



1,528,827



1,528,827A
    Series  Class II (variable portion)


510,714



2,979,817



2,979,817A1
    Series Class II (variable portion)


6,088,896



6,088,896



6,088,896B
    Series  Class I (fixed portion)


763,113







B
    Series  Class II (variable portion)


463,260







B1
    Series Class II (variable portion)


5,848,209



10,181,950



10,181,950N
    Series  Class II (variable portion)


12,237,513



10,331,670



8,861,835N1
    Series Class II (variable portion)


122,468,441



219,245,038



220,714,874N2
    Series Class II (variable portion)


26,867,820



26,867,820



26,867,820Subtotal


176,013,680



277,224,018



277,224,019Authorized shares not outstanding:(treasury shares)N Series


26,603,926



3,361,483



3,024,011N1 Series






22,679,507



23,110,943Subtotal


26,603,926



26,040,990



26,134,954Total authorized shares


202,617,606



303,265,008



303,358,972     2004


2005Capital stock

Ps.
2,255,565


Ps.
2,524,094Restatement effect


245,392



220,513Total capital stock

Ps.
2,500,957


Ps.
2,744,607    F-20




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      Ley General de Sociedades
    Mercantiles
                inter alia: paid-up
 F-21




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        NOTE 14
     POSITION IN FOREIGN
    CURRENCY:
    2004


2005U.S. dollars:Assets

$
7,357


$
15,351Liabilities


(69,481
)


(79,938
)Net liabilities in
    U.S. dollars

$
(62,124
)

$
(64,587
)Exchange rate at end of the year
    (Ps. per U.S.$1.00)

Ps.
11.26


Ps.
10.71     NOTE 15
     INCOME TAX, ASSET TAX AND TAX LOSS
    CARRYFORWARDS:
        2004


2005Income tax incurred

Ps
651


Ps.
635Deferred income tax






25,971Total provision

Ps.
651


Ps.
26,606    F-22




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2004


2005CURRENT:Allowance for uncollectible
    accounts

Ps.
20,864


Ps.
24,146Inventory


(3,741
)


Prepaid expenses


(22,595
)


(29,905
)Provisions


72,362



70,410Total current


66,890



64,651NON-CURRENT:Telephone network equipment and
    leasehold improvements, frequency rights, intangible assets and
    preoperating expenses  Net


(305,768
)


(215,895
)Asset tax paid in previous years


33,247



33,227Tax loss carry forwards


1,077,244



95,930Total non-current


804,723



(86,738
)Net deferred tax (liabilities)
    assets before valuation allowance


871,613



(22,087
)Tax losses valuation allowance


(871,613
)


(3,884
)Deferred income tax liabilities

Ps.



Ps.
(25,971
)       Year ofYear of Loss

Amount


Maturity1996

Ps.
504



20061997


1,800



20071998


11,569



20081999


29,380



20092000


39,446



20102001


54,712



20112002


58,486



20122003


18,461



20132004


1,019



20142005


127,230



2015Ps.
342,607    F-23




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      2004


2005Employees profit sharing
    incurred

Ps.
483


Ps.
Deferred employees profit
    sharing






Total provision

Ps.
483


Ps.
   NOTE 16
     COMMITMENTS AND
    CONTINGENCIES:
          2006

Ps.
35,5632007


29,4012008


25,7402009


17,9412010 and thereafter:


36,905Ps.
145,550     2
    2006

$
1,7592007


1,8062008


1,8492009


1,8972010 and thereafter:


5,981$
13,292      F-24




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2006

Ps.
4,0322007


3,6452008 and thereafter:


3,324Total (*)

Ps.
11,001     (*)
    
    Includes interest to be accrued in Ps.2,279.    2006

$
8792007


3632008 and thereafter:


134Total (*)

$
1,376     (*)
    
    Includes interest to be accrued in $7.               F-25




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 17
     REVENUE BY GEOGRAPHICAL
    LOCATION:
    Metropolitan


Downtown-Services

Area


South


TotalYear that ended on December the 31
    of 2005:Local

Ps.
465,565


Ps.
303,498


Ps.
769,063Long distance


190,704



161,081



351,785Rent of dedicated links


332



478



810Sale of client equipment


2,667



2,973



5,640Lease of capacity


22,347







22,347Other


827







827Ps.
682,442


Ps.
468,030


Ps.
1,150,472   Metropolitan


Downtown-Services

Area


South


TotalYear that ended on December the 31
    of 2004:Local

Ps.
462,760


Ps.
268,076


Ps.
730,836Long distance


91,128



48,585



139,713Rent of dedicated links


463



942



1,405Sale of client equipment


3,663



2,019



5,682Lease of capacity


18,297







18,297Other


1,216







1,216Ps.
577,527


Ps.
319,622


Ps.
897,149   Metropolitan


Downtown-Services

Area


South


TotalYear that ended on December the 31
    of 2003:Local

Ps.
421,077


Ps.
253,438


Ps.
674,515Long distance


73,989



46,720



120,709Rent of dedicated links


3,238



566



3,804Sale of client equipment


15,679



2,066



17,745Lease of capacity


15,246







15,246Other


193







193Ps.
529,422


Ps.
302,790


Ps.
832,212   NOTE 18
     STOCK OPTION
    PLANS:
       F-26




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
                             F-27




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
              2003


2004


2005Weighed-





Weighed-





Weighed-Average





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding at beginning of year


15,935


$
0.56



4,377


$
1.16



4,464


$
1.14Granted


318



0.27



188



0.01



13,712



0.49Exercised


173



0.01



100



0.01



0



0.00Cancelled


11,703



0.33



0



0.00



78



0.01Outstanding at the end of the year


4,377



1.16



4,465



1.14



18,098



0.65Options exercisable at the end of
    the year


2,587



1.41



2,675



1.36



7,226



0.71Weighted-average of options
    granted during the year (nominated in U.S. dollars)





$
0.26






$
0.00






$
0.00  F-28




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Weighed-AverageRange





Remaining


Exercise





Exerciseof Prices


Number


Life


Price


Number


PriceAs of December 31, 2005

$
0.01



638



0.41


$
0.01



638


$
0.010.49



3,627



6.32



0.49



3,627



0.490.50



13,530



9.58



0.50



2,706



0.508.70



33



3.24



8.70



33



8.7010.45



191



4.24



10.45



179



10.4512.55



80



5.24



12.55



45



12.55As of December 31, 2004

$
0.01



533



0.41


$
0.01



533


$
0.010.49



3,627



7.32



0.49



1,886



0.498.70



33



4.24



8.70



33



8.7010.45



191



5.24



10.45



179



10.4512.55



80



6.24



12.55



45



12.55As of December 31, 2003

$
0.01



445



1.59


$
0.01



445


$
0.010.49



3,627



8.33



0.49



1,886



0.498.70



33



5.24



8.70



33



8.7010.45



191



6.25



10.45



179



10.4512.55



80



7.25



12.55



45



12.55       3 4
         F-29




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Weighed-





Weighed-





Weighed-Average





Average





Average2003


Exercise


2004


Exercise


2005


ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding at beginning of year


3,341


$
2.37



3,341


$
2.37



3,341


$
2.37Granted






















Exercised






















Cancelled


















1,106



3.06Outstanding at the end of the year


3,341



2.37



3,341



2.37



2,235



2.02Options exercisable at the end of
    the year


3,341


$
2.37



3,341


$
2.37



2,235


$
2.02Weighed average of options granted
    during the year (nominated in U.S. dollars)





$







$







$
     ExercisableOutstanding:


Weighted-Weighted-Average





AverageRange





Remaining


Exercise





Exerciseof Prices


Number


Life


Price


Number


PriceAs of December 31, 2005

$
0.01



1,432



0.86


$
0.01



1,432


$
0.013.06



442



2.00



3.06



442



3.068.70



362



0.00



8.70



362



8.70As of December 31, 2004

$
0.01



1,432



1.96


$
0.01



1,432


$
0.013.06



1,548







3.06



1,548



3.068.70



362



0.05



8.70



362



8.70As of December 31, 2003

$
0.01



1,432



2.93


$
0.01



1,432


$
0.013.06



1,548



1.00



3.06



1,548



3.068.70



362



1.05



8.70



362



8.70   NOTE 19
     HEDGES OF CASH
    FLOWS:
        NOTE 20
     SUBSEQUENT
    EVENTS:
   F-30




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        NOTE 21 
    SIGNIFICANT DIFFERENCES BETWEEN MEXICAN AND THE UNITED STATES
    GENERALLY ACCEPTED ACCOUNTING
    PRINCIPLES:
        Years Ended December 31,2005


2004


2003Net loss under Mexican GAAP

Ps.
(71,239
)

Ps.
(133,303
)

Ps.
(399,115
)Adjustments:Amortization of pre-operating
    expenses(a)


36,302



36,616



37,319Capitalization of interest(b)


(1,122
)


(779
)


(500
)Amortization of capitalized
    interest(b)


2,594



1,782



1,001Amortization of frequency rights(c)










11,892Installation revenues and related
    costs(d)


3,006



(20,249
)


(33,454
)Installation costs not charged to
    customers(e)


(64,292
)


(65,772
)


(51,811
)Debt restructuring(f)


48,616



1,403,473



22,884Capitalized internal compensation
    cost(g)


132



132



132Spin-off and sale of subsidiary


217,925







Total US GAAP adjustments


243,161



1,355,203



(12,537
)Net income (loss) under US GAAP

Ps.
171,922


Ps.
1,221,900


Ps.
(411,652
)   F-31




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  2005


2004BALANCE AS OF DECEMBER 31,Shareholders equity
    (deficit) under Mexican GAAP

Ps.
1,783,846


Ps.
1,637,160Accumulated adjustments:Preoperating expenses(a)


(363,036
)


(363,036
)Amortization of preoperating
    expenses(a)


242,284



205,982Capitalization of interest(b)


66,639



67,761Amortization of capitalized
    interest(b)


(12,333
)


(14,927
)Amortization of frequency rights(c)






Installation revenues and related
    costs(d)


(63,059
)


(66,065
)Installation costs not charged to
    customers(e)


(286,954
)


(222,662
)Debt restructuring(f)


(182,473
)


(231,089
)Capitalized internal compensation
    cost(g)


(2,250
)


(2,382
)Total US GAAP adjustments

Ps.
(601,182
)

Ps.
(626,418
)Shareholders equity
    (deficit) under US GAAP

Ps.
1,182,664


Ps.
1,010,742     Year Ended December 31,2005


2004Balance at the beginning of the
    year

Ps.
1,010,742


Ps.
(413,664
)Net income (loss) under US GAAP


171,922



1,221,900Increase in capital stock






202,506Balance at the end of the year

Ps.
1,182,664


Ps.
1,010,742              F-32




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
                          3 4 3 4 3 4
       F-33




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
                         F-34




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    SFAS 109


SFAS 109Applied to


Applied toMexican GAAP


US GAAPBalances


Balances


TotalDecember 31, 2005Deferred assets:Allowance for doubtful accounts

Ps.
24,146






Ps.
24,146Asset tax payments


33,227







33,227Tax loss carryforwards


95,930







95,930Accruals


70,410







70,410Installation revenues






17,657



17,657Deferred tax assets


223,713



17,657



241,370Deferred liabilities:Prepaid expenses


(29,905
)






(29,905
)Telephone network equipment and
    leasehold improvements, frequency rights, intangible assets and
    preoperating expenses


(215,895
)


19,235



(196,660
)Installation costs






80,347



80,347Deferred tax liabilities


(245,800
)


99.582



(146.218
)Net deferred income tax asset
    before valuation allowance


(22,087
)


117.239



95.152Valuation allowance


(3,884
)


(117.239
)


(121.123
)Ps.
(25,971
)

Ps.



Ps.
(25.971
)   F-35




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  SFAS 109


SFAS 109Applied to


Applied toMexican GAAP


US GAAPBalances


Balances


TotalDecember 31, 2004Deferred assets:Allowance for doubtful accounts

Ps.
20,864






Ps.
20,864Asset tax payments


33,247







33,247Tax loss carryforwards


1,077,244







1,077,244Accruals


72,362







72,362Installation revenues






21,141



21,141Deferred tax assets


1,203,717



21,141



1,224,858Deferred liabilities:Inventory


(3,471
)






(3,471
)Prepaid expenses


(22,595
)






(22,595
)Telephone network equipment and
    leasehold improvements, frequency rights, intangible assets and
    preoperating expenses


(305,768
)


34,112



(271,656
)Installation costs






71,252



71,252Debt issuance costs on
    restructuring






(5,406
)


(5,406
)Deferred tax liabilities


(332,103
)


99.958



(232.145
)Net deferred income tax asset
    before valuation allowance


871,614







992.712Valuation allowance


(871,614
)






(992,712
)Ps.







Ps.
         F-36




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Year Ended December 31,2005


2004


2003Operating activities:Net income (loss) under US GAAP


171,922


Ps.
1,221,900


Ps.
(411,652
)Adjustments to reconcile net
    income (loss) to net cash flow provided by operating activities:Depreciation and amortization


242,608



334,334



265,355Gain on restructuring of debt






(1,347,930
)


Fixed asset write-offs


11,479







8,709Allowance for doubtful accounts


28,625



35,544



55,324Monetary gain


(22,090
)


(113,865
)


(90,794
)Non recurring charges










8Allowance for inventory of
    obsolescence


306



1,080



3,795Deferred Income Tax


25,971







Foreign currency exchange loss


(18,141
)


102,229



205,017440,680



233,292



35,762Changes in operating assets and
    liabilities:Accounts receivable


(99,078
)


(3,750
)


(57,073
)Inventory


(4,021
)


6,298



2,495Prepaid expenses


(12,917
)


(13,745
)


(19,154
)Accrued interest






756



Accrued expenses and other
    accounts payable


143,926



(77,439
)


61,452Cash flow provided by (used in)
    operating activities


468,590



145,412



18,492Financing activities:Restricted cash


11,173



(18,845
)


Proceeds from loans and notes
    payable


129,998



163,184



Cash flow provided by financing
    activities


141,171



144,339



Investing activities:Acquisition of fixed assets


(380,591
)


(247,547
)


(70,410
)Other assets


(55,154
)






(300
)Cash flow used in investing
    activities


(441,745
)


(247,547
)


(70,710
)Cash and cash equivalents:Effect of inflation and exchange
    rate changes on cash and cash equivalents


(6,782
)


(25,381
)


(33,211
)Net increase (decrease) increase
    in cash and cash equivalents


161,234



16,823



(85,427
)Cash and cash equivalents at
    beginning of the year


62,189



45,366



130,793Cash and cash equivalents at end
    of the year


223,423



62,189



45,366Interest paid

Ps.
69,994


Ps.
24,009


Ps.
22,445Taxes paid

Ps.
505


Ps.
13,535


Ps.
25,404Supplemental disclosures of
    non-cash investing and financing activities:Capital stock issued in exchange
    for services

Ps.



Ps.



Ps.
Capital stock issued in exchange
    for advertising

Ps.



Ps.



Ps.
Reduction of notes payable from
    troubled debt restructuring

Ps.



Ps.
1,474,389


Ps.
      F-37




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        Accounting Changes and Error Corrections
  No. 05-6, Determining the Amortization Period for Leasehold
    Improvements 05-6). 05-6 05-6
  No. FAS 13-1, No. FAS 13-1 FAS 13-1 No. FAS 13-1
  No. 05-7, Accounting for Modifications to Conversion Options
    Embedded in Debt Instruments and Related Issues. No. 05-8, Income Tax Consequences of Issuing Convertible Debt
    with a Beneficial Conversion Feature. Accounting for Income Taxes.
   F-38




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
       Bulletin B-10,
    ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedBalance sheet as of December 31,
    2005:Cash and cash equivalents and
    Current restricted cash

Ps.
215,820



654



473



82



6,394







223,423Accounts receivable  net


144,070



141



12,423



2,263



193,888



(136,377
)


216,408Inventory  net


15,403























15,403Prepaid expenses


75,769



401



609



7



6,474



(6,476
)


76,784Restricted cash long term


7,672























7,672Investment in subsidiaries


206,471







55











(206,526
)


Frequency rights  net


86,102























86,102Telephone network system and
    Equipment net


2,082,795























2,082,795Preoperating expenses 
    net


122,305























122,305Retirement Obligations






1,588



13,210















14,798Intangible assets  net


303,527























303,527Other assets


5,954



178



2,076







4,362



(2,069
)


10,501Total assets

Ps.
3,265,888


Ps.
2,962


Ps.
28,846


Ps.
2,352


Ps.
211,118


Ps.
(351,448
)

Ps.
3,159,718Total liabilities

Ps.
1,482,042


Ps.
4,861


Ps.
31,106


Ps.
2,297


Ps.
600


Ps.
(145,034
)

Ps.
1,375,872Shareholders Equity:Capital Stock and Additional Paid-
    In Capital


2,964,229



89



61



51



213,215



(213,416
)


2,964,229Accumulated deficit


(1,180,383
)


(1,988
)


(2,321
)


4



(2,697
)


7,002



(1,180,383
)Total shareholders equity


1,783,846



(1,899
)


(2,260
)


55



210,518



(206,414
)


1,783,846Total liabilities and
    Shareholders  equity

Ps.
3,265,888


Ps.
2,962


Ps.
28,846


Ps.
2,352


Ps.
211,118


Ps.
(351,448
)

Ps.
3,159,718Total shareholders equity
    under Mexican GAAP

Ps.
1,783,846


Ps.
(1,899
)

Ps.
(2,260
)

Ps.
55


Ps.
210,518


Ps.
(206,414
)

Ps.
1,783,846   F-39




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedPreoperating expenses


(363,036
)






















(363,036
)Amortization of preoperating
    expenses


242,284























242,284Capitalization of interest


66,639























66,639Amortization of capitalized
    interest


(12,333
)






















(12,333
)Amortization of frequency rights


























(63,059
)Installation revenues


(63,059
)






















(286,954
)Installation costs


(286,954
)






















(182,473
)Debt restructuring


(182,473
)






















(182,473
)Bonus capitalization


(2,250
)






















(2,250
)Deferred tax provisions


(2,939
)






















(2,939
)Retirement obligations


675























675Total shareholders equity
    under US. GAAP


1,180,400



(1,899
)


(2,260
)


55



210,518



(206,414
)


1,180,400   ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedStatements of Operations for the
    year ended December 31, 2005:Revenues

Ps.
1,150,371


Ps.
38,155


Ps.
270,955










Ps.
(309,009
)

Ps.
1,150,472Operating cost and expenses


(1,133,357
)


(38,075
)


(271,057
)


23



(213
)


309,009



(1,133,670
)Integral (cost) income of financing


(52,240
)


(2
)


17



(38
)


(2,795
)






(55,058
)Other income (expenses)


(36,013
)


(230
)


1,823



19



311



1,107



(32,983
)Net (loss) income

Ps.
(71,239
)

Ps.
(152
)

Ps.
1,738


Ps.
4


Ps.
(2,697
)

Ps.
1,107


Ps.
(71,239
)Net (loss) income for the year
    under Mexican GAAP

Ps.
(71,239
)

Ps.
(152
)

Ps.
1,738


Ps.
4


Ps.
(2,697
)

Ps.
1,107


Ps.
(71,239
)Amortization of preoperating
    expenses


36,302























36,302Capitalization of interest


(1,122
)






















(1,122
)Amortization of capitalized Interest


2,594























2,594Amortization of frequency rights
    Installation revenues


3,006























3,006Installation costs


(64,292
)






















(64,292
)Debt restructuring


48,616























48,616Bonus capitalization


132























132Spin-off and sale of subsidiary


217,925























217,925Net loss (income)for the year Under U.S. GAAP

Ps.
171,922


Ps.
(152
)

Ps.
1,738


Ps.
4


Ps.
(2,697
)

Ps.
1,107


Ps.
171,922   F-40




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedStatement of Cash Flows under
    U.S. GAAP for the Year Ended December 31, 2005:Net (loss) income

Ps.
171,922


Ps.
(152
)

Ps.
1,738


Ps.
4


Ps.
(2,697
)

Ps.
1,107


Ps.
171,922Depreciation and amortization


242,608























242,608Other adjustments to reconcile net
    income to cash provided by operating activities


26,150























26,150Net change in working capital


27,910



(152
)


1,738



4



(2,697
)


1,107



27,910Resources (used in) provided by
    Operating activities


670,730



404



(185
)


82



6,394



(208,844
)


468,590Resources used in financing
    activities


141,171























141,171Resources (used in) provided by
    investing activities


(650,589
)


















208,844



(441,745
)Effect of inflation on cash and
    cash equivalents


(6,782
)






















(6,782
)Cash and cash equivalents:Net increase (decrease) in cash And
    cash equivalents


154,540



404



(185
)


82



6,394







161,234Beginning balances


61,280



250



658















62,189Ending balances

Ps.
215,820


Ps.
654


Ps.
473


Ps.
82


Ps.
6,394


Ps.



Ps.
223,423   F-41




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Maxcom


Corporativo


Servicios


Elimination


ConsolidatedBalance sheet as of
    December 31, 2004:Cash and cash equivalents

Ps.
61,280


Ps.
250


Ps.
658


Ps.



Ps.
62,188Current restricted cash


5,740















5,740Accounts receivable  net


152,317



241



14,788



(13,420
)


153,926Inventory  net


11,688















11,688Prepaid expenses


65,538



196



461







69,195Restricted cash long term


13,105















13,105Frequency rights  net


97,419















97,419Telephone network system and
    equipment  net


1,783,833















1,783,833Preoperating expenses 
    net


158,607















158,607Intangible assets  net


378,330















378,330Other assets


21,438



173











21,611Total assets

Ps.
2,752,295


Ps.
860


Ps.
15,907


Ps.
(13,420
)

Ps.
2,755,642Total liabilities

Ps.
1,115,136


Ps.
2,606


Ps.
19,905


Ps.
(19,164
)

Ps.
1,118,483Shareholders Equity:Capital stock and additional
    paid-in-capital


3,396,451



89



61



(150
)


3,396,451Accumulated deficit


(1,759,292
)


(1,835
)


(4,059
)


5,894



(1,759,292
)Total shareholders equity


1,637,159



(1,746
)


(3,998
)


5,744



1,637,159Total liabilities and
    shareholders equity

Ps.
2,752,295


Ps.
860


Ps.
15,907


Ps.
(13,420
)

Ps.
2,755,642Total shareholders equity
    under Mexican GAAP

Ps.
1,637,159


Ps.
(1,746
)

Ps.
(3,998
)

Ps.
5,744


Ps.
1,637,159Preoperating expenses


(363,036
)














(363,036
)Amortization of preoperating
    expenses


205,982















205,982Capitalization of interest


67,761















67,761Amortization of capitalized interest


(14,927
)














(14,927
)Installation revenues


(66,065
)














(66,065
)   Maxcom


Corporativo


Servicios


Elimination


ConsolidatedInstallation costs


(222,662
)














(222,662
)Debt restructuring


(231,088
)














(231,088
)Bonus capitalization


(2,382
)














(2,382
)Total shareholders equity
    under US GAAP

Ps.
1,010,742


Ps.
(1,746
)

Ps.
(3,998
)

Ps.
5,744


Ps.
1,010,742   F-42




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Maxcom


Corporativo


Servicios


Elimination


ConsolidatedStatements of Operations for the
    year ended December 31, 2004:Revenues


Ps.897,149



Ps.31,030



Ps.235,215



Ps.(266,245
)


Ps.897,149Operating cost and expenses


(1,051,009
)


(30,207
)


(234,551
)


266,245



(1,049,522
)Integral (cost) income of financing


48,666



(43
)


235







48,858Other income (expenses)


(28,110
)


(640
)


(399
)


(640
)


(29,789
)Net (loss) income


Ps.(133,304
)


Ps.140



Ps.500



Ps.(640
)


Ps.(133,304
)Net (loss) income for the year
    Under Mexican GAAP


Ps.(133,304
)


Ps.140



Ps.500



Ps.(640
)


Ps.(133,304
)Amortization of preoperating
    expenses


36,616















36,616Capitalization of interest


(778
)














(778
)Amortization of capitalized interest


1,781















1,781Installation revenues


(20,249
)














(20,249
)Installation costs


(65,772
)














(65,772
)Debt restructuring


1,403,474















1,403,474Bonus Capitalization


132















132Net loss (income) for the year
    under US GAAP


Ps.1,221,900



Ps.140



Ps.500



Ps.(640
)


Ps.1,221,900Statement of Changes in Financial
    Position for the Year Ended December 31, 2004:Net (loss) income


Ps.(133,304
)


Ps.140



Ps.500



Ps.(640
)


Ps.(133,304
)Depreciation and amortization


346,045















346,045Net change in working capital


212,741



140



500



(640
)


212,741Resources (used in) provided by
    operating activities


275,971



147



658







276,714Financing activities:Issuance of capital stock


595,945















595,945Additional paid in capital


893,898















893,898Proceeds from loans and notes
    payable


(1,394,376
)














(1,390,376
)Resources used in financing
    activities


99,467















99,467Investing activities:Telephone network systems and equipm


(355,008
)














(335,008
)Intangible assets


(33,348
)














(33,348
)Other assets


8,988



8











8,996Resources (used in) provided by
    investing activities


(359,368
)


8











(359,360
)Cash and cash equivalents:   F-43




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Maxcom


Corporativo


Servicios


Elimination


ConsolidatedBalance sheet as of
    December 31, 2003:Cash and cash equivalents and
    restricte

Ps.
45,270


Ps.
96


Ps.



Ps.



Ps.
45,366Accounts receivable  net


136,292



183



9,994



(9,042
)


137,426Inventory  net


20,056















20,056Prepaid expenses


58,080



119



129







58,328Frequency rights  net


104,644















104,644Telephone network system and equipme


1,671,129















1,671,130Preoperating expenses 
    net


195,247















195,247Intangible assets  net


424,859















424,859Other assets


30,425



182











30,607Total assets

Ps.
2,686,002


Ps.
580


Ps.
10,123


Ps.
(9,042
)

Ps.
2,687,663Total liabilities

Ps.
2,405,382


Ps.
2,464


Ps.
14,622


Ps.
(15,426
)

Ps.
2,407,043Shareholders Equity:Capital stock and additional
    paid-in-capital


1,906,608



89



61



(150
)


1,906,608Accumulated deficit


(1,625,988
)


(1,975
)


(4,559
)


6,534



(1,625,988
)Total shareholders equity


280,620



(1,886
)


(4,498
)


6,384



280,620Total liabilities and
    shareholders equity

Ps.
2,686,002


Ps.
580


Ps.
10,123


Ps.
(9,042
)

Ps.
2,687,663Total shareholders equity
    under Mexican GAAP

Ps.
280,620


Ps.
(1,886
)

Ps.
(4,498
)

Ps.
6,384


Ps.
280,620Preoperating expenses


(363,036
)














(363,036
)Amortization of preoperating
    expenses


169,366















169,366Capitalization of interest


68,540















68,540Amortization of capitalized interest


(16,709
)














(16,709
)Installation revenues


(45,816
)














(45,816
)Installation costs


(156,890
)














(156,890
)Debt restructuring


(347,225
)














(347,225
)Bonus capitalization


(2,514
)














(2,514
)Total shareholders equity
    under US GA

Ps.
(413,664
)

Ps.
(1,886
)

Ps.
(4,498
)

Ps.
(6,384
)

Ps.
(413,664
)Statements of Operations for the
    year ended December 31, 2003:Revenues

Ps.
832,211


Ps.
49,434


Ps.
200,599


Ps.
(250,032
)

Ps.
832,212Operating cost and expenses


(1,084,452
)


(49,489
)


(200,772
)


251,299



(1,083,414
)Integral (cost) income of financing


(134,020
)


86



219







(133,715
)Other income (expenses)


(12,854
)


(22
)


(666
)


(654
)


(14,196
)Net (loss) income

Ps.
(399,115
)

Ps.
(9
)

Ps.
(620
)

Ps.
(613
)

Ps.
(399,113
)   F-44




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Maxcom


Corporativo


Servicios


Elimination


ConsolidatedNet (loss) income for the year
    under Mexican GAAP


Ps.(399,115
)


Ps.9



Ps.(620
)


Ps.(613
)


Ps.(399,113
)Amortization of preoperating
    expenses


37,319















37,319Capitalization of interest


(500
)














(500
)Amortization of capitalized interest


1,001















1,001Amortization of frequency rights


11,892















11,892Installation revenues


(33,454
)














(33,454
)Installation costs


(51,811
)














(51,811
)Debt restructuring


22,884















22,884Bonus capitalization


132















132Net loss (income) for the year
    under US GAAP


Ps.(411,652
)


Ps.9



Ps.620



Ps.613



Ps.(411,650
)Statement of Changes in Financial
    Position for the Year Ended December 31, 2003:Net (loss) income


Ps.(399,115
)


Ps.9



Ps.(621
)


Ps.613



Ps.(399,113
)Depreciation and amortization


365,411















365,411Net change in working capital


(33,704
)


9



(621
)


613



(33,703
)Resources (used in) provided by
    operating activities


(38,021
)


(8,020
)


(5,172
)






(51,213
)Financing activities:Additional paid-in capital


1,121















1,121Proceeds from loans and notes
    payables


100,930















100,930Resources used in financing
    activities


102,051















102,051Investing activities:Telephone network systems and equipm


(118,784
)














(118,784
)Intangible assets


(17,184
)














(17,184
)Other assets


(307
)


8











(299
)Resources (used in) provided by
    investing activities


(136,275
)


8











(136,267
)Cash and cash equivalents:Net increase (decrease) in cash and
    cash equivalents


(72,245
)


(8,011
)


(5,172
)






(85,429
)Beginning balances


117,515



8,107



5,172







130,794Ending balances


Ps.45,270



Ps.96



Ps.



Ps.



Ps.45,366    F-45




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S.A. DE C.V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Balance at


Charged toBeginning of


Cost and





Balance at EndPeriod


Expenses


Deductions


of PeriodAllowance for doubtful accounts


2005



Ps.65.2



Ps.24.5



Ps.(20.8
)


Ps.68.82004



Ps.67.7



Ps.36.5



Ps.(39.0
)


Ps.65.22003



Ps.36.3



Ps.55.3



Ps.(23.9
)


Ps.67.7Allowance for obsolete and slow-
    moving supply inventories


2005



Ps.0.3



Ps.



Ps.



Ps.0.32004



Ps.0.3



Ps.



Ps.



Ps.0.32003



Ps.0.7



Ps.



Ps.(0.4
)


Ps.0.3Allowance for obsolete and slow-
    moving network inventories


2005



Ps.9.3



Ps.



Ps.0.1



Ps.9.42004



Ps.10.4



Ps.



Ps.(1.1
)


Ps.9.32003



Ps.14.3



Ps.



Ps.(3.9
)


Ps.10.4Allowance for lease penalty


2005



Ps.



Ps.



Ps.



Ps. 2004



Ps.



Ps.



Ps.



Ps. 2003



Ps.8.3



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Ps.(8.3
)


Ps.   F-46




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##### Table of Contents



ITEM 19.EXHIBITS  Page1
.

By-laws (estatutos) of Maxcom
    Telecomunicaciones, S.A. de C.V. as amended to June 10,
    2003.

*****2(a)


Not applicable.2(b)1
.

Indenture dated as of
    March 17, 2000 among Maxcom, Corporativo en
    Telecomunicaciones, S.A. de C.V. and The Bank of New York, as
    Trustee.

**2
.

Indenture dated as of
    April 29, 2002 among Maxcom, Corporativo en
    Telecomunicaciones, S.A., de C.V., Maxcom Servicios
    Administrativos, S.A., de C.V. and The Bank of New York, as
    Trustee.

*3
.

Second Supplemental Indenture
    dated as of April 29, 2002 among Maxcom, Corporativo en
    Telecomunicaciones, S.A. de C.V., Maxcom Servicios
    Administrativos, S.A. de C.V. and the Bank of New York, as
    Trustee.

*4
.

Amended and Restated Indenture,
    dated as of October 8, 2004 amoung Maxcom, Corporativo en
    Telecomunicaciones S.A. de C.V., Maxcom Servicios
    Administrativos, S.A. de C.V., Maxcom USA, Inc. and the Bank of
    New York, as trustee.

******5
.

Indenture, dated as of
    October 8, 2004 among Maxcom, Corporativo en
    Telecomunicaciones S.A. de C.V., Maxcom Servicios
    Administrativos, S.A. de C.V., Maxcom USA, Inc. and the Bank of
    New York, as trustee.

******2(c)


Not applicable.1
.

CPO Trust Agreement effective
    April 25, 2002 among Maxcom., its shareholders and Banco
    Nacional de México, S.A., Institución de Banca
    Múltiple, Grupo Financiero Banamex Accival, acting as
    trustee.

*2
.

Second amended and Restated
    Securityholders Agreement entered into as of April 29, 2002
    among Maxcom and certain existing and new securityholders.

*4(a)


Agreement for the use of
    infrastructure and installation of fiber optic cable on the
    highways between Puebla and Mexico, dated August 18, 1998,
    between Amaritel, S.A. de C.V. (the predecessor of Maxcom
    Telecomunicaciones, S.A. de C.V.) and Iusatel, S.A. de C.V.

**4(b)


Interconnection Agreement for long
    distance services, dated January 22, 1999, between Amaritel
    and Teléfonos de Mexico (Telmex) valid for a period of two
    years between February 1, 1999 and January 1, 2001.
    The agreement establishes that it would remain in effect after
    the expiration date if no further agreement for its termination
    or renewal has been entered into, in accordance with article 42
    of the Mexican Telecommunications law.

**4(c)


Local Interconnection Service
    Agreement, dated November 24, 1998, between Amaritel, S.A.
    de C.V. and Teléfonos de Mexico, S.A. de C.V.

**4(d)


Amendment to Local Interconnection
    Service Agreement, dated February 25, 1999, between
    Amaritel, S.A. de C.V. and Teléfonos de Mexico, S.A. de
    C.V., originally entered into on November 24, 1998.

**4(e)


Metropolitan Network Capacity Sale
    Agreement, dated April 28, 2000, between Maxcom
    Telecomunicaciones, S.A. de C.V. and Metro Net, S.A. de C.V.
    (including amendment dated December 21, 2000).

***4(f)


Telecommunications Service
    Agreement dated November 15, 1999, between Maxcom and
    Teléfonos de México, S.A. de C.V.

**4(g)


Telecommunications Service
    Agreement dated March 9, 1999, between Maxcom and Bestel
    S.A. de C.V., according to which Bestel will provide long
    distance and private calls services to Maxcom.

**4(h)


Concession for the installation
    and operation of telecommunications services granted to
    Amaritel, S.A. de C.V. by the Secretary of Telecommunications
    and Transport on December 20, 1996.

** E-1




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##### Table of Contents



Page4(i)


Amendment to Concession for the
    installation and operation of telecommunications services
    granted to Amaritel by the Secretary of Telecommunications and
    Transport on December 20, 1996, dated September 8,
    1999, extending the coverage of such concession to include
    various additional municipalities of the State of Mexico.

**4(j)


Amendment to Concession for the
    installation and operation of telecommunications services
    granted to Amaritel by the Secretary of Telecommunications and
    Transport on December 20, 1996, dated December 7,
    1999, authorizing Maxcom to employ whatever technologies it
    deems appropriate in providing telecommunications services to
    various municipalities.

**4(k)


Amendment to Annex A and B of
    Concession for the installation and operation of
    telecommunications services granted to Amaritel, S.A. de C.V. by
    the Secretary of Telecommunications and Transport on
    December 20, 1996, dated September 27, 2001, extending
    the coverage of such concession to include all of Mexico.

**4(l)


Concession for a public
    telecommunications network in Regions 3, 5 and 8 granted to
    Amaritel, S.A. de C.V. by the Secretary of Telecommunications
    and Transport on April 29, 1998.

**4(m)


Concession for the operation of
    point-to-multipoint
    microwave telecommunications services in Region 5 granted to
    Amaritel, S.A. de C.V. by the Secretary of Telecommunications
    and Transport on April 23, 1998.

**4(n)


Concession for the operation of
    point-to-multipoint
    microwave telecommunications services in Region 3 granted to
    Amaritel, S.A. de C.V. by the Secretary of Telecommunications
    and Transport on April 23, 1998.

**4(o)


Concession for the operation of
    point-to multipoint microwave telecommunications services in
    Region 8 granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on April 29, 1998.

**4(p)


Concessions for the nationwide
    operation of
    point-to-point
    microwave telecommunications services using five frequency bands
    in the 56 MHz bandwidth, each granted to Amaritel, S.A. de
    C.V. by the Secretary of Telecommunications and Transport on
    June 4, 1998.

**4(q)


Concessions for the nationwide
    operation of
    point-to-point
    microwave telecommunications services using two frequency bands
    in the 100 MHz bandwidth, each granted to Amaritel, S.A. de
    C.V. by the Secretary of Telecommunications and Transport on
    June 4, 1998.

**4(r)


Amendment to Concession for the
    operation of
    point-to-multipoint
    telecommunications services in Regions 3, 5, 8 granted to
    Amaritel, S.A. de C.V. by the Secretary of Telecommunications
    and Transport on April 1, 1998, dated October 12,
    1999, regarding the start date for the initiation of services.

**4(s)


Amendment to Concession for the
    installation and operation of telecommunications services
    granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on December 20, 1996,
    dated September 24, 1999 eliminating financial restrictions.

**4(t)


Warrant Agreement dated as of
    March 17, 2000 between Maxcom Telecomunicaciones, S.A. de
    C.V. and The Bank of New York, acting as warrant agent.

***4(u)


Dark fiber optic purchase
    agreement dated as of August 13, 2002 between Maxcom
    Telecomunicaciones, S.A. de C.V. and Bestel S.A. de C.V.

****4(v)


Transactional Lease Termination
    Agreement dated as of May 20, 2003 among Maxcom
    Telecomunicaciones, S.A. de C.V. and Jacobo Zaga Romano, Jacobo
    Zaga Buzali, et.al..

****4(w)


Capacity sale agreement dates as
    of October 15, 2003, between Maxcom Telecomunicaciones,
    S.A. de C.V. and Axtel, S.A. de C.V. [xxx].

*****4(x)


Credit Agreement dated
    April 28, 2004 by and among Banco Santander Mexicano, S.A.
    Institución de Banca Mútiple Grupo Financiero
    Santander Servin, as Lender, and Maxcom, as Borrower.

******* E-2




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##### Table of Contents



Page4(y)


Credit Agreement dated
    April 13, 2005 by and among Ixe Banco, S.A.,
    Institución de Banca Mútiple, Ixe Grupo Financiero.,
    as Lende, and Maxcom, as Borrower.

*******4(z)


Amendment dated August 5,
    2004 to Exhibit B of the Master Agreement to
    Supply Local Interconnection Services, dated February 25,
    1999 between Maxcom and Telefonos de Mexico, S.A. de C.V.

*******4(aa)


Credit Agreement dated
    April 13, 2005 by and among Ixe Banco, S.A.,
    Institución de Banca Múltiple, Ixe Grupo Financiero,
    as Lender, and Maxcom, as Borrower

4(bb)


Credit Agreement dated
    October 25, 2005 by and among Ixe Banco, S.A.,
    Institución de Banca Múltiple, Ixe Grupo Financiero,
    as Lender, Maxcom, as Borrower and Maxcom SF, S.A. de C.V. as
    joint and several obligor and amendment dated December 13,
    2005

4(cc)


Credit Agreement dated
    October 21, 2005 by and among Banco Mercantil del Norte,
    S.A., Institución de Banca Múltiple, Grupo Financiero
    Banorte, as Lender and Maxcom, as Borrower

4(dd)


Irrevocable Trust Agreement dated
    November 21, 2005 by and among Maxcom, as Settlor, Banco
    Mercantil del Norte, S.A., Institución de Banca
    Múltiple, Grupo Financiero Banorte and Ixe Banco, S.A.,
    Institución de Banca Múltiple, Ixe Grupo Financiero,
    as trust beneficiaries and HSBC México, S.A.,
    Institución de Banca Múltiple, Grupo Financiero HSBC,
    Trust Division, as trustee

4(ee)


Maxcom Shareholders Meeting dated
    August 31, 2005 approving the spin-off

4(ff)


Stock Purchase Agreement dated
    November 22, 2005 by and among Maxcom and Maxcom SF, S.A.
    de C.V., as Sellers and Tiendas Comercial Mexicana, S.A. de C.V.
    and Controladora Comercial Mexicana, S.A. de C.V. , as Buyers.

5
.

Not applicable.8
.

No significant subsidiaries.9
.

Not applicable.10
.

None.11
.

Maxcoms Code of Ethics
    adopted March, 2006.

12
.1

Certification of the Chief
    Executive Officer pursuant to
    Rule 13a-14(a).12
.2

Certification of the Chief
    Financial Officer pursuant to
    Rule 13a-14(a).13
.1

Certification of the Chief
    Executive Officer pursuant to 18 U.S.C. Section 1350

13
.2

Certification of the Chief
    Financial Officer pursuant to 18 U.S.C. Section 1350

99
.1

Computation of earnings per share.

99
.2

Computation of ratio of earnings
    to fixed charges.     *
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on July 1, 2002.**
    
    Previously filed with Registration Statement on
    Form F-4
    NO. 333-11910 submitted on May 5, 2000.***
    
    Previously filed with annual report on
    Form 20-F,
    as amended, submitted on June 29, 2001 and on
    September 28, 2001.****
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on June 30, 2003.*****
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on June 29, 2004.******
    
    Previously filed with annual report on
    form 20-F,
    submitted to he SEC on June 30, 2005.[xxx]
    
    Certain material has been omitted pursuant to a request for
    confidential treatment request. The places in this document
    where material has been omitted is marked with a asterisk and
    brackets [*] The omitted material has been filed
    separately with the SEC pursuant to
    Rule 24b-2
    under the Securities Exchange Act of 1934.
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on June 30, 2006. E-3




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GLOSSARY
    OF TELECOMMUNICATIONS TERMS   ADSL
    
    (Asymetrical Digital Subscriber Line) ADSL is a physical-layer
    protocol that supports up to 8 Mbps bandwidth downstream
    and up to 1 Mbps upstream. The asymmetrical aspect of ADSL
    technology makes it ideal for Internet browsing, video on
    demand, and remote LAN access. Users of these applications
    typically download more information than they send. ADSL also
    allows simultaneous voice communication by transmitting data
    signals outside of the voice frequency range.Band
    
    A range of frequencies between two defined limits.Bandwidth
    
    The relative range of analog frequencies or digital signals that
    can be passed through a transmission medium, such as glass
    fibers, without distortion. The greater the bandwidth, the
    greater the information carrying capacity. Bandwidth is measured
    in Hertz (analog) or Bits Per Second (digital).Capacity
    
    Refers to the ability to transmit voice or data over
    telecommunications networksCarrier
    
    A licensed provider of telecommunications transmission services
    by fiber, wire or radio.Centrex service
    
    A business telephone service developed originally by Lucent
    Technologies which offers private branch exchange type features
    directly from the local telephone company central office, such
    as voicemail, call
    pick-up
    group, abbreviated dialing and multi-line hunting.Churn
    
    Refers to customer line attrition and is measured as the
    percentage of disconnects from service relative to the total
    subscriber base over a given period of time.COFETEL
    
    Comisión Federal de Telecomunicaciones, the Mexican
    Federal Telecommunications Commission.Digital
    
    Describes a method of storing, processing and transmitting
    information through the use of distinct electronic or optical
    pulses that represent the binary digits 0 and 1. Digital
    transmission/switching technologies employ a sequence of
    discrete, distinct pulses to represent information, as opposed
    to the continuously variable analog signal.DSLAM
    
    Digital Subscriber Line Access Multiplexer. A technology to
    concentrate traffic in ADSL implementations through time
    division multiplexing at the central office.E1
    
    A digital telephony format that carries data at the rate of
    2.048 Mbps
    (DS-1
    level). E-1
    is the European and Latin American version of
    North American T-1, though T-1 is 1.544 Mbps.Fiber optic technology
    
    Fiber optic systems use laser-generated light to transmit voice,
    data and video in digital format through ultra-thin strands of
    glass. Fiber optic systems are characterized by large circuit
    capacity, good sound quality, resistance to external signal
    interference and direct interface to digital switching equipment
    and digital microwave systems. A pair of fiber optic strands
    using advanced transmission technologies is capable of carrying
    multiple 2.5 or 10 Gbps communication streams. Because optical
    signals disperse over distance, they must be G-1




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regenerated/amplified at sites located along the fiber optic
    cable. Fiber optic systems using earlier eneration fiber require
    frequent intervals between regeneration/amplifier sites. Greater
    distances between regeneration/amplifier sites afforded by the
    use of advanced fiber generally translate into substantially
    lower installation and operating costs and fewer potential
    points of failure.Fixed wireless local loop
    
    A wireless local telephony service using the 3.4-3.7 GHz
    frequency band.FTTH
    
    Fiber-to-the-home,
    reference to an all fiber-optic public telephone network design,
    where broadband services are delivered to the customer
    premises/network interface by fiber optic.Gbps
    
    Gigabits per second. A measurement of speed for digital signal
    transmission expressed in billions of bits per second (Gbps).Gulf region
    
    115 cities and towns in eleven states in eastern Mexico,
    which includes the cities of Puebla, Tampico, Veracruz, Reynosa,
    Cancún, Chetumal, Mérida, Ciudad del Carmen, Campeche,
    Coatzacoalcos and Tuxtla Gutiérrez, among others.Hertz
    
    The unit measuring the frequency with which an alternating
    electromagnetic signal cycles through the zero-value state
    between lowest and highest states. One hertz (abbreviated Hz)
    equals one cycle per second. KHz (kilohertz) stands for
    thousands of hertz; MHz (megahertz) stands for millions of hertz
    and GHz (gigahertz) stands for billions of hertz.ISDN
    
    Integrated Services Digital Network. ISDN is an international
    standard that provides
    end-to-end
    digital connectivity to support a wide range of voice, data and
    video services.Kbps
    
    Kilobits per second, a measurement of speed for digital signal
    transmission expressed in thousands of bits per second.Lambdas
    
    Lambdas are used as the symbol for wavelength in lightwave
    systems. Fiber optic systems may use multiple wavelengths of
    light, with each range of wavelengths appearing in a
    window, roughly corresponding to a color in the
    visible light spectrum.LAN
    
    Local area network, a private data communications network
    linking a variety of data devices, such as computer terminals,
    personal computer terminals, personal computers and
    microcomputers, all housed in a defined building, plant or
    geographic area.Microwave technology
    
    Although limited in capacity compared with fiber optic systems,
    digital microwave systems offer an effective and reliable means
    of transmitting lower volume and narrower bandwidths of voice,
    data and video signals over short and intermediate distances.
    Microwaves are very high frequency radio waves that can be
    reflected, focused and beamed in a
    line-of-sight
    transmission path. As a result of their electro-physical
    properties, microwaves can be used to transmit signals through
    the air, with relatively little power. To create a
    communications circuit, microwave signals are transmitted
    through a focusing antenna, received by an antenna at the next
    station in the network, then amplified and retransmitted.
    Because microwaves disperse as they travel through the air, this
    transmission process must be repeated at repeater stations,
    which consist of radio equipment, antennae and
    back-up
    power sources, located on average every 30 kilometers along the
    transmission route. G-2




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Mbps
    
    MegaBits per second. A measurement of speed for digital signal
    transmission expressed in millions of bits per second (Mbps).Multi-line hunting
    
    A value-added service that allows for multiple calls to be
    received with a single telephone number.PCS
    
    Personal Communications Services. PCS has come to represent two
    things: first, a digital wireless communications service
    operating over the 1.9 GHz band; and second, more
    generically, a wireless communications service utilizing a
    digital network that offers typical features such as voice,
    video and data applications, short messaging, voicemail, caller
    identification, call conferencing and call forwarding. Generic
    PCS suppliers promote this service on the ability of its
    features to be customized, or bundled, to the needs
    of the individual customers.Point-to-multipoint
    microwave transmission
    
    A transmission using microwave technology by which a single
    signal goes from one origination point to many destination
    points.Point-to-point
    microwave transmission
    
    A transmission using microwave technology by which a signal goes
    from one point to another, usually connected by some dedicated
    transmission line.POTS
    
    Plain Old Telephone Service. The basic service supplying
    standard single line telephones, telephone lines and access to
    the public switched network.SCT
    
    Secretaría de Comunicaciones y Transportes, the Mexican
    Communications and Transportation Ministry.Switch
    
    A device that opens or closes circuits or selects the paths or
    circuits to be used for transmission of information. Switching
    is the process of interconnecting circuits to form a
    transmission path between users.Teledensity
    
    Teledensity is a measure of telephony service in a population.
    It is calculated by dividing the total subscriber base (number
    of lines in service) by the inhabitants and multiplying by 100.
    It is generally used as a comparative measure of network
    development. All teledensity figures are reported in subscribers
    per 100 inhabitants.Triple play services
    
    Triple play services consist combination of voice, data, and
    video services offered as a bundled service for a price that is
    less than the price of the individual services acquired
    individually.VoIP
    
    Voice over Internet Protocol services consist in the technology
    that provides telephone companies with the ability to carry
    normal telephony-style voice over an Internet Protocol-based
    Internet with POTS-like functionality, reliability, and voice
    quality.VPN
    
    Virtual Private Network. A network design offering the
    appearance and functionality of a dedicated private network.Web-hosting
    
    A service performed by Internet service providers (also known as
    ISPs) and Internet access providers (also known as IAPs)
    consisting in the hosting of outside companies web pages to be
    displayed on the Internet.xDSL
    
    XDSL is a physical-layer protocol that supports bandwidth
    downstream and upstream. G-3




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SIGNATURES
  Form 20-F/A
    By:
    /s/  JOSE
    ANTONIO SOLBES